The
High Court has no power to unilaterally approve taxpayer offers of a deal over
tax arrears without Inland Revenue first agreeing.
Inland Revenue
successfully appealed a High Court order allowing Rotorua car dealer Ronald
Maxwell Wilson resist bankruptcy by paying $150,000 over five years supposedly in
full settlement of tax arrears. He made
this offer when faced with a bankruptcy notice in the High Court; a precursor
to bankruptcy. The High Court was sympathetic,
expressing the view this would see Inland Revenue paid in full.
The Court of Appeal was
told it was not that simple. In fact, Mr
Wilson at that time had tax arrears totalling some $225,000 for unpaid income
tax, child support, GST and penalties for late payment. Inland Revenue turned down previous offers to
pay arrears by instalments. It said
figures presented by Mr Wilson left him and his wife with only $585 per month
to live on after making promised instalment payments. Suggestions of raising a loan to make
payments lacked evidence of how such a loan could be repaid. The integrity of the tax system required firm
action be taken against those not complying, Inland Revenue said. Bankruptcy sent this message.
Creditors have a say
under the Insolvency Act when deals are on offer. A creditor may agree to withdraw a bankruptcy
notice in return for a favourable offer of payment. Or creditors collectively may vote on a
proposal for debts to be reduced or payment terms extended.
Inland
Revenue v. Wilson – Court of Appeal (31.3.17)
17.030