This year has been interesting in many ways, more punctuated
by case law and hardening of IRD positions than significant
legislative change to the tax framework, although the
significant delay of long-ago announced legislation will mean
there are some law changes for us to manage.
One of the challenges in an environment of parliamentary
delays is that one of the key pillars of a successful tax
system - taxpayer certainty - becomes undermined as
taxpayers, and their advisers, have to take tax positions
based not on enacted legislation but rather ''press release''
or draft legislation subject to change through the normal
process. This is entirely unsatisfactory.
We certainly see 2013 as bringing more of the same, with
pressure on the IRD to generate more Government revenue
through the closing of what they would portray as
''loopholes'', but in our view are well established tax
Some of this will be via policy U-turns, like the
accommodation allowance debacle of recent times where (in our
view) the IRD has changed its collective mind on what was a
reasonably settled piece of tax law (a net benefit approach
to accommodation provided by employers), and then effectively
backdated this by suggesting they were never bound by their
previously espoused view, so taxpayers should voluntarily
disclose shortfalls for the past two years.
We, along with our many colleagues in the tax world, are
horrified by this approach, and are concerned this could
become a precedent for the future. Furthermore, we see more
''policy'' changes becoming reality via back-door legislative
''remedial'' changes slipped through below the radar,
clarifying what was apparently always ''Parliament's
In every tax Bill there are a number of remedial amendments.
As a tax advisory industry, we consider there are any number
of legislative fixes that should be enacted where the
legislation as drafted just does not work. However, the
emphasis of remedial changes appears less around creating
taxpayer certainty on certain matters than delivering new
ways to collect revenue in the guise of ''clarification''.
We have always found this concept of ''Parliament's
intention'' an interesting one as, like anyone who has sat in
the House as legislation is passed, we observe that often
there is a dearth of understanding of what is being voted on
as whips funnel MPs to their respective slots during the
vote. So perhaps more correctly this concept should be seen
as ''official's intentions'' which seem to evolve over time
and particularly in hindsight.
Either way, we can only see the compliance costs for the
average business becoming even greater, as the proverbial
sledgehammer is used to crack minor nuts. The proposed
changes to the taxation of mixed-use assets are a good
example. It is a relatively minor issue being addressed by
horrendously complex and unwieldy rules in an attempt to dot
every possible ''i'' and cross every conceivable ''t''.
But credit where it is due, we have found the IRD's approach
in respect of personal services income (following the 2001
Penny and Hooper case) refreshing and positive in many ways,
although there are instances at a ground level of some
heavy-handedness by some IRD investigators.
None of this is a particularly happy way to finish the year
for Sharp As Tax, so perhaps we should conclude on a more
positive note. We are absolutely positive 2013 will be
another year of change for taxpayers and advisers as many
signalled issues are reviewed and legislated for. Until next
year, the WHK team wishes you a very Merry Christmas and a
safe New Year.
- Scott Mason is Managing Principal of WHK Tax