Unacceptable tax position shortfall penalty

Clause 146

Issue: Support for the amendment

Submission

(Corporate Taxpayers Group)

The submitter is supportive of the proposed amendment to clarify that the unacceptable tax position penalty does not apply in respect of GST and withholding tax shortfalls, and the retrospective application of this amendment.

Recommendation

That the submission be noted.

Issue: Drafting

Submission

(Ernst & Young, New Zealand Institute of Chartered Accountants)

The proposed method of clarifying “income tax” in section 141B is unnecessarily complex, involving the introduction of a new term “core income tax”. We submit that “income tax” should be retained as the relevant term in section 141B(2) and new section 141B(10) should define “income tax” for the purpose of the section as “income tax as defined in section YA 1 of the Income Tax Act 2007 ignoring the effect of section RA 2 of that Act”.

Comment

The proposal clarifies that the unacceptable tax position penalty does not apply to shortfalls that arise in respect of GST and withholding-type taxes. That is, the penalty will only apply to income tax shortfalls. Officials agree with the submission which would align the proposal with the original intent of the 2007 amendment. It would also prevent the introduction of a new term.

Recommendation

That the submission be accepted.