Abstract:
The CFC & FIF regimes were originally enacted to prevent New Zealand taxpayers
using tax havens to avoid or defer their New Zealand tax obligations. However both
regimes contain a number of provisions that have not been adopted by any of the
major OECD countries or any of NZ major trading partners. For example, the CFC
regime does not contain an active income exemption and the FIF regime often taxes
unrealised capital gains. Those features have lead to widespread criticism and a range
of taxpayer responses to ameliorate the negative impact the current rules have on
legitimate off shore trade and investment decisions. Part one of this article examines: the tax planning opportunities which both regimes were designed to curtail,
the behavioural responses of taxpayers to the perceived harshness of the
current law, and
the McLeod Committee recommendations, which were designed to achieve a
more appropriate balance between taxpayers, legitimate commercial offshore
investment decisions and the ongoing threat posed by tax havens.
