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Inland Revenue

Tax Policy

Use of existing anti-avoidance provisions


(15 – WHK Taylors, 39 – Russell McVeagh, 67 – New Zealand Institute of Chartered Accountants)

The existing anti-avoidance provisions in the Income Tax Act 2007, including the general anti-avoidance provision in section BG 1, should be used to counter transactions that threaten the tax base.

Alternatively, the associated persons rules should apply only in cases of proven tax avoidance.

Expanding definitions of associated persons rather than applying the anti-avoidance provisions in appropriate circumstances will result in transactions being subject to tax where there is no policy justification for imposing tax.


The types of transactions and structures that the amendments are directed against raise significant tax base concerns.

The submissions argue that the associated persons reforms are unnecessary because the types of transactions and structures causing concern should be countered under the various anti-avoidance provisions in the Income Tax Act 2007. Although it is possible that Inland Revenue could be successful in applying the anti-avoidance provisions against these types of transactions and structures, this may involve litigation, the outcome of which is not certain. Also, any possible litigation involving the anti-avoidance provisions can take considerable time to complete. Officials do not consider that it is sufficiently certain or timely to rely on the anti-avoidance provisions to address the types of transactions and structures causing concern.

The best way of protecting the tax base with sufficient certainty and in a timely manner against the type of transactions and structures causing concern is to proceed with the proposed amendments. This is supported by the high priority that protection of the tax base has in the current economic and fiscal environment.


That the submissions be declined.