Professor Craig Elliffe, LLB (Hons), BCom Otago, LLM Camb, PhD Camb, FCA. Craig is a professor of taxation at the Faculty of Law. Craig was appointed President after 14 years as a tax partner at KPMG and 9 years as a tax partner at Chapman Tripp. Craig`s research areas are in the areas of tax, corporate tax and tax evasion. He is the author of International and Cross-Border Taxation in New Zealand (Thomson Reuters), winner of the JF Northey Award for Best Code in 2015, and Dividend Imputation: Practice and Procedure (Lexis) and has written numerous articles and other documents on taxation. He is listed in Chambers and the International Tax Review as the leading tax practitioner. He is Director of the MTaxS Program (the first postgraduate tax course in New Zealand). He was a member of the government`s tax working group (2018/19). This article discusses the current state of interpretation of tax treaties in New Zealand, paying particular attention to a recent decision that has attracted attention here in New Zealand and abroad. The case concerned whether a New Zealand resident was entitled to a tax-saving credit under the New Zealand/Chinese double taxation agreement.
The Lin case was decided in the Auckland High Court. The Court of Appeal`s decision overturned the High Court`s decision, while the request for leave was rejected by the Supreme Court on June 20, 2018. That`s why this article is at the heart of this article. In the author`s view, the Lin approach was an overly inappropriate interpretation of the text, which was no doubt at odds with the basic tenants of the Vienna Convention on Treaty Law. There are two major problems that arise from this approach. The first is that inconsistencies between different states are undesirable. A contract can be interpreted very differently by both parties if their courts follow an independent interpretation of the text without resorting to other guidelines. Second, the OECD`s comment is often something that the Commissioner wishes to refer to in the illustration of a preferred interpretation or meaning. Ironically, the Commissioner who won this case may have significantly reduced her ability to argue teleologically in future disputes. This may be a Pyrrhic victory, given the influence of tax officials on the OECD comment and the revenues that flow from it, which have gained attention.
The Court of Appeal`s interpretive approach appears to be at odds with the broader approach to the objective generally applied to treaty interpretation and is likely at odds with the decision of the Supreme Court of the United Kingdom in Anson. The consequences of the Court of Appeal`s decision and the Supreme Court`s decision not to appeal could be seen as New Zealand`s international appeal, far from an international consensus in the common law world on treaty interpretation. “The Court of Appeal in Commissioner of Inland Revenue/Lin`s approach cannot be reconciled with previous examples of the interpretation of the New Zealand tax treaty, nor does it conform to international jurisdictions in common law legal systems,” says Professor Elliffe. The expert in international tax law is highly critical of the Commissioner`s decision on domestic revenues/Lin, in particular because he argues that the judgment does not adequately take into account the OECD`s commentary model, as required by the Vienna Convention on Treaty Law. The Court of Appeal also ruled that Article 23, paragraph 2, point a), would be exempt only from double legal taxation and not from double economic and legal taxation.4 The fact that the DBA between China and New Zealand is explicitly exempted only from some sort of economic double taxation (i.e. economic double taxation).