The
Court of Appeal blocked attempts by Michael Hill Jewellers to drive Inland
Revenue into a corner over $35 million in disputed tax deductions claimed to
flow from its trans-Tasman restructuring.
Inland Revenue alleges deductions claimed
by Michael Hill following its 2008 transfer of intellectual property rights to
a Queensland-based limited partnership amount to tax avoidance. Michael Hill sued, claiming to have evidence
of similar transactions Inland Revenue accepted as not tainted by tax
avoidance. It said Inland Revenue must
act consistently, treating taxpayers in the same circumstances similarly. If successful, Michael Hill would be arguing
for the same tax outcome as these prior cases even where Inland Revenue has
changed its mind over what forms of restructuring amount to tax avoidance.
Tax law requires assessments to be made
”fairly, impartially and according to law”.
The Court of Appeal said correctness according to law is the sole
criterion for determining tax liablity.
Inconsistency between taxpayers may point to an error in one assessment
or another, but there is no duty on Inland Revenue to act consistently, the
Court ruled. An appropriate degree of
consistency is achieved by challenging a tax assessment, once made.
Inland Revenue claims there are
“significant differences” between the Michael Hill restructuring and the
allegedly similar cases.
Inland
Revenue v. Michael Hill – Court of Appeal (21.06.16)
16.095