Designing a Powerful General Anti-Avoidance Rule: Reflections on the New Zealand Experience

BTR, Issue 5, 2023

21 Pages Posted: 18 Jan 2024

See all articles by Craig Elliffe

Craig Elliffe

University of Auckland - Faculty of Law

Date Written: December 19, 2023


Even despite the legislative deficiencies in the New Zealand General Anti-Avoidance Rule (GAAR), the New Zealand anti-avoidance rule is a provision that has been remarkably successful and effective from the perspective of the tax system administration. There are three primary reasons the New Zealand law effectively prevents tax avoidance.

The first point is that the New Zealand tax avoidance experience is mainly a judge-made law. The New Zealand law can be a significant lesson to jurisdictions with continual problems with interpreting more complex and detailed general anti-avoidance provisions. The New Zealand GAAR might be described more as a signpost pointing out the general direction of travel rather than a detailed map.

Secondly, after considerable judicial debate, the New Zealand courts have solved the statutory interpretation question of reconciling the relationship between the specific provisions providing definitive taxpayer outcomes (such as a deduction) and the GAAR. The “tandem approach” to interpretation proposed by the New Zealand Supreme Court recognises the importance of both the specific and the GAAR. Nonetheless, when these tax avoidance features are present, the GAAR is in the driving seat, not just a passenger.

Lastly, the formulation of the parliamentary contemplation test in the New Zealand Supreme Court decision of Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue (Ben Nevis)1 provides a framework to assist the courts in determining the features of tax avoidance. Most importantly, it highlights the interaction between a legal and factual analysis. The legal analysis considers the purpose of the provisions, and the objective factual review examines how the taxpayer has used those provisions. This examination of the facts goes beyond the legal form of structures and documentation and considers the commercial and economic reality of what has occurred. Recent New Zealand Supreme Court cases have described part of this process as determining the “economic substance” of the arrangement.

The lesson for the development of general anti-avoidance legislation, is that, perhaps, a broad scope and an absence of technical requirements in the legislation can produce a dynamic and effective regime in the hands of the judiciary.

Note: “This material was first published by Thomson Reuters, trading as Sweet & Maxwell, 5 Canada Square, Canary Wharf, London, E14 5AQ, in the British Tax Review as Designing a Powerful General Anti-Avoidance Rule: Reflections on the New Zealand Experience [2023] B.T.R., No.5 and is reproduced by agreement with the publishers”.

Keywords: general anti-avoidance, GAAR, tax avoidance, judge-made law

JEL Classification: K34, K33

Suggested Citation

Elliffe, Craig Macfarlane, Designing a Powerful General Anti-Avoidance Rule: Reflections on the New Zealand Experience (December 19, 2023). BTR, Issue 5, 2023, Available at SSRN: or

Craig Macfarlane Elliffe (Contact Author)

University of Auckland - Faculty of Law ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

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