Non-disclosure right

2009 amendment to the Tax Administration Act allows the right of non-disclosure to apply to discovery and similar processes that occur during litigation.

Sections 3(1) and 20B to 20G of the Tax Administration Act 1994

An amendment has been made to the Tax Administration Act 1994 to allow the right of non-disclosure to apply to discovery and similar processes that occur during litigation.


In 2005, the government introduced a right of non-disclosure relating to certain tax advice documents provided between tax advisors who are not lawyers and their clients so there is greater parity between lawyers (who are able to claim legal professional privilege) and other tax advisors. The ability to not disclose such documents applies at the investigation and disputes phases entered into by, or with, Inland Revenue. However, the right did not extend to preventing disclosure of these documents by the Commissioner of Inland Revenue during litigation. In contrast, legal privilege extends throughout both court and administrative proceedings.

Key features

The right of non-disclosure in sections 20B to 20G of the Tax Administration Act 1994 has been amended to allow the right to apply to documents that the Commissioner has sought to be disclosed during litigation. The amendment allows the Commissioner to have access to the facts (the tax contextual information), but not to the tax advisor’s view of the facts.

Previously, the ability of the Commissioner or taxpayer to challenge the claim that a book or document is a “tax advice document” subject to the non-disclosure right was determined by a District Court Judge. This may have created difficulties if the matter was being heard in another court. A further amendment has been made to allow the determination to be made by the court hearing the matter.

Application date

When the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill was introduced, the amendment was to apply to challenges begun on or after the date of enactment.

Some submissions on the bill at the Committee stage considered that the application date should be retrospective. However, it became clear that any application date that had any element of retrospectivity would be problematic. In some cases parties may have already disclosed documents as part of the discovery proceedings. As with legal privilege, this could be treated as a waiver of their non-disclosure right or could mean that the discovery process would need to be revisited. Other parties who have not yet disclosed information could (subject to the weight judges give to proposed legislation) be protected by an early application date, resulting in inconsistent treatment among taxpayers. Such a change would compound uncertainty and add complexity to proceedings.

The New Zealand Institute of Chartered Accountants suggested that the measure should apply if the Commissioner has made a request for information after 1 April 2009. However, the same issues that arise in respect of a retrospective application date would have applied to this option.

The Institute suggested in the alternative that the earliest practical time from which the right of non-disclosure could apply was in relation to discovery orders requested on or after the date of Royal assent of the bill. This application date was also problematic in that there may be several requests for information and/or discovery in a case. The provision would therefore have been difficult to define. It could also have resulted in application of the non-disclosure right to some but not all such requests in the same case and consequent confusion about which documents were or were not able to be used in litigation.

The policy intent of the non-disclosure right was, however, to provide a level of parity of treatment between tax advice provided by lawyers and that provided by other tax advisors.

Therefore the application provision was amended. Under the amended legislation the right of non-disclosure at the discovery phase applies to future disputes and current disputes which have not advanced to the first conference required under the High Court rules or the Taxation Review Authority regulations as at 6 October 2009. Discovery action is frequently the first agreed step after the initial conference and therefore this application provision will in many cases be equivalent to one based on discovery, but is more certain.

A concern about current cases which raise substantially similar issues to later cases was also taken into account in the application provision. The concern was that if the earlier case has not had the protection of the non-disclosure right but the later cases did have this protection, taxpayers may decide to proceed with the later cases given that they have the benefit of the non-disclosure right and could possibly result in a more favourable decision. This could incur significant costs of litigation for both parties. Therefore there is an exception to the application provision for future cases if a substantially similar issue is currently being considered by the courts - the amendment does not apply to the future case if the challenge was begun before the date of Royal assent, being 6 October 2009.