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19 Sep 2012
Appeal Status
Not appealed

Commissioner successful in her strike-out application

2012 case note – reaffirms that where there is a dispute over the amount of tax to pay, disputant and CIR are to engage in the disputes process - M?ori sovereignty.

TRA 40/10 [2012] NZTRA 09


The Commissioner was successful in having the disputant's claim struck out. The disputants may seek leave from the Taxation Review Authority ("TRA") to file an amended claim disputing the correctness of the Commissioner's assessments.

Impact of decision

This case reaffirms that everyone is subject to the laws of Parliament and Revenue Acts. Where there is a dispute over the amount of tax to pay, the disputant and the Commissioner are to engage in the disputes process. To challenge an assessment, the disputant should identify why and how the Commissioner's calculation of the tax owed should be corrected.


The disputant provides shearing services to farmers. However, from January 2005 the disputant stopped making PAYE tax deductions from wages payable to its employees and did not account to the Commissioner for those deductions.

The Commissioner commenced an investigation in early 2007. During an interview with the director of the disputant, the director expressed his view that the preamble to the Te Ture Whenua Māori Act 1993 means that no tax is required to be paid by the disputant.

In November 2007, the Commissioner issued pursuant to section 17 of the Tax Administration Act 1994, a request for disclosure of information and production of books and documents for inspection. The director of the disputant advised the Commissioner that the shareholders had passed a resolution transferring the shares to a trust. As the trust was constituted under a Māori Authority it could not provide the documents requested. The disputant said that to do so would be in breach of the regulations of the Māori Authority and Te Ture Whenua Māori Act 1993.

In January 2008, the Commissioner received a notice informing him that a hearing at Te Tii Waitangi Marae was set down for February 2008 to determine whether the disputant had to provide the information requested. The Commissioner responded advising that they would not be attending as the Commissioner did not recognise the Māori Court referred to.

The Commissioner issued a notice of proposed adjustment on 12 March 2009 proposing to amend the disputant's monthly employer schedules for the periods January 2005 to June 2007, to include payments to shearers and shed hands. PAYE was to be calculated on the payments to the shearers and shed hands.

A shortfall penalty for evasion was proposed.

The disputant responded with a notice of response and claimed that the information it provided was in breach of the Māori Authority's regulations. The disputant repeated its argument that it does not have to pay tax or provide any information to the Commissioner.

Despite attempts, no conference was held. The parties exchanged Statement of Positions that essentially repeated earlier arguments. The matter was referred to Inland Revenue's Adjudication Unit who concluded that the disputant was liable for tax deductions to be made under the PAYE rules from the wages paid to the shearers and shed hands. Notices of amended assessments for the income years in dispute were issued.

The disputant filed its notice of claim with the TRA. The Commissioner applied to have the claim struck out.


The TRA rejected the disputant's argument that it is under the authority of the Māori Authority and therefore is exempt from taxes. It held that the Revenue Acts apply to the disputant.

As the disputant is a taxpayer and obliged to pay taxes under the provisions of the Revenue Acts, the disputant must also comply with any section 17 notices issued by the Commissioner. The TRA held that the Commissioner cannot be estopped from performing his statutory functions. If the Commissioner had no power to obtain confidential information, the whole taxation system and its rationale would break down as the burden of taxation would fall only on diligent and honest taxpayers.

The TRA accepted that the Commissioner had followed the disputes procedure and engaged with the disputant to discuss the tax in dispute. The Commissioner had also acted in good faith throughout this dispute. However, the TRA recognised that the disputant mistakenly continued to argue that it was not liable to pay tax.

The TRA recognised that the disputant could dispute the correctness of the Commissioner's assessments on the basis that the shearers were independent contractors and not employees. To do this, the disputant would have to set out why and how the Commissioner's calculation of tax owed by the disputant is to be corrected.  As the disputant's pleadings were confusing and misguided, the TRA allowed the disputant one month to apply to the TRA to amend its pleadings. Leave was also allowed for the disputant to argue that the shortfall penalty for evasion is not appropriate. The TRA considered it is arguable that the disputant was sincere in its views about Māori sovereignty affecting its PAYE responsibilities.

The disputant's claim was struck out. The disputant has one month to apply to the TRA, if it chooses, to pursue the issue of whether the shearers or shed hands were employees or independent contractors. The disputant may also apply to argue that a lower level of shortfall penalty should be imposed.

Rule 2.50 of the District Court Rules 2009, section 17 and Part IVA of the Tax Administration Act 1994