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Retrospective GST Legislation

The New Zealand Law Society’s Taxation Committee strongly disapproves of the Government’s announcement to introduce retrospective GST legislation.

The legislation, announced by Minister of Revenue Dr Michael Cullen today, is intended to prevent some tourism operators and education providers from claiming refunds of GST based on a Court of Appeal decision made in 1995.

“Passing legislation to deny refunds to which taxpayers may be legally entitled undermines confidence in the New Zealand legal system,” Taxation Committee Convener Niels Campbell said.

“If taxpayers have claimed refunds which Inland Revenue does not consider should be available, those claims should be determined by the Courts in the ordinary way, not through retrospective legislation denying taxpayers the right to make a claim at all.

“Tax laws should not be changed so that they affect the consequences of actions previously taken by taxpayers - unless that legislation is “taxpayer friendly”, which this legislation clearly is not. Business relies on certainty as to the rules being applied.

“The proposed changes should not be viewed as mere ‘clarification’ of the law because the issues in respect of which amending legislation is now being proposed were fully considered by the Court of Appeal with subsequent amending legislation (prospective) being passed in 1999. That legislation was passed as part of a full review of the GST system and, at that time, the relevant issues were fully canvassed. There was no suggestion then that the amendments should be made retrospective.

“Since that time nothing has changed except that taxpayers have sought refunds of GST overpaid. Now it appears that, due to the amounts involved, the Government is seeking to prevent taxpayers from obtaining tax refunds to which they may be legally entitled.

“Where cases are pending, or taxpayers are otherwise in dispute with the IRD, the law should be allowed to run its course. There are numerous precedents for this course to be adopted.

“Retrospective legislation results in uncertainty as to the legal consequences of business transactions. The result of actions that people take today is being altered after the event by Government. This is an inappropriate use of amending legislation and must result in a reduction in confidence in the New Zealand legal system,” Niels Campbell said.

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