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The Test for Tax Avoidance in New Zealand: A Judicial Sea-Change

Craig Elliffe

University of Auckland - Faculty of Law

Jessica M. Cameron

Chapman Tripp

June 15, 2010

New Zealand Business Law Quarterly, Vol. 16, pp. 440-460, 2010

This article, by analysing Ben Nevis, Glenharrow and the Court's subsequent application of these cases in the above judgements, seeks to determine whether these cases add anything “rich and strange” to our understanding of the way the income tax GAAP should be applied. Or do they simply represent the latest iteration of the various judicial glosses that have sprung up over the last fifty years as a result of the inherent difficulty in applying this enigmatic provision and countering inappropriate tax avoidance.

What emerges is that there appears to be a sea change. Although the “scheme and purpose” approach remains, it is modified by two factors. First, an explicit acknowledgment that in a tandem approach to interpretation of the black letter law and the GAAR, the GAAR is to be given equal weight and purposively interpreted. Secondly, the test is modified by that the addition, or some might say a substitution, of a Parliamentary contemplation test.

The result of both of these significant changes is an empowering of the judiciary to pursue a form of interpretation which is much less formalistic and necessarily involves even more of an enquiry into the commercial and business motivations of the taxpayer. A natural consequence may be a greater reliance on the attitude of the judges applying the test and definitely a significant loss of certainty for the taxpayers. The result is that the pendulum has swung in favour of the Revenue

Number of Pages in PDF File: 21

Keywords: New Zealand tax avoidance, Supreme Court, Ben Nevis, Glenharrow, Westpac, BNZ, Penny and Hooper, section BG1, Parliamentary Contemplation

JEL Classification: K34

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Date posted: June 16, 2010 ; Last revised: October 23, 2010

Suggested Citation

Elliffe, Craig and Cameron, Jessica M., The Test for Tax Avoidance in New Zealand: A Judicial Sea-Change (June 15, 2010). New Zealand Business Law Quarterly, Vol. 16, pp. 440-460, 2010. Available at SSRN: http://ssrn.com/abstract=1625604

Contact Information

Craig Macfarlane Elliffe (Contact Author)
University of Auckland - Faculty of Law ( email )
Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand
Jessica M. Cameron
Chapman Tripp ( email )
New Zealand
Feedback to SSRN

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