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Inland Revenue

Tax Policy

Tax recovery arrangements – application date

Clause 508


(67 – New Zealand Institute of Chartered Accountants)

This legislation is penal and the amendment (that clarifies that changes such as interest, administrative penalties and costs may be collected under New Zealand’s tax recovery arrangements) should not apply retrospectively. It should only apply from the date of assent of the current legislation. Clearly this legislation was not clear before that date, therefore taxpayers should not be punished by legislation that had not been passed at the time the act was undertaken.


The legislation is not unclear. New Zealand’s tax recovery arrangements (generally forming part of a double tax agreement although, in one case, established as a stand-alone convention) all expressly state that penalties and certain other costs may be recovered. Those arrangements have been given overriding effect by Order in Council to become part of New Zealand law. The amendment to the Tax Administration Act 1994 is being sought to prevent the possibility of a highly technical argument being made that certain provisions of the Act (chiefly the definition of “tax”) can be construed as presenting an obstacle to the recovery of penalties. Such an argument would run counter to the clear intention that penalties can be recovered. Given that New Zealand’s treaty obligations under tax recovery arrangements came into effect from 1 April 2008, it is appropriate to ensure that the amendment also has effect from 1 April 2008.


That the submission be declined.