Jurisdiction of the District Court in tax claim
2008 case note – 'Unpaid tax' is a 'debt' under the District Courts Act 1947. It is the only founding jurisdiction of the District Court for a claim for unpaid tax.
Tax Administration Act 1994 (TAA), District Court Rules 1992 and District Courts Act 1949
Summary
"Unpaid tax" constitutes a "debt" for the purpose of section 29 of the District Courts Act 1947. It is the only founding jurisdiction of the District Court for a claim for unpaid tax.
Facts
The Commissioner had commenced proceedings against the taxpayer in the Masterton District Court to recover $5,111.67 for the balance of income tax and penalties in respect of years ended March 2003 and 2004.
The taxpayer took the point at the District Court that it had no jurisdiction to consider the Commissioner's claim. He took the same point to the High Court by applying for the judicial relief of prohibition to preclude the District Court from hearing the Commissioner's claim.
In the High Court the Commissioner applied to strike out the taxpayer's claim for judicial relief.
Decision
Dobson J held that the Commissioner acting under section 106 (1) [assessment in the event of the taxpayer failing to file a return] and section156 (1) of the TAA, was competent to file a claim in the District Court to recover unpaid tax. The District Court had jurisdiction to hear it under section 29(1) of the District Courts Act 1949 as a claim for a debt. As such there was no reasonable cause of action for judicial relief and the taxpayer's case in the High Court was struck out with costs to the Commissioner.
The Judge also discussed the decision of the District Court on the jurisdiction issue. He thought the District Court was wrong to hold that the Commissioner's claim could be supported on the alternative ground that it was a "penalty" under section 30 of the District Court Act.