Corporate Governance and Tax Compliance

Chris Ohms, AUT University
Karin Olesen, AUT University

Abstract: This article examines corporate governance from the perspective of tax compliance in relation to tax avoidance in New Zealand after the decision of the Supreme Court in Penny and Hooper v Commissioner of Inland Revenue (2011) 25 NZTC 20- 073on 24 August 2011. In response to tax avoidance strategies used by New Zealand taxpayers, the legislative response by Parliament has been to introduce a general anti-avoidance provision (GAAR) currently in the form of section BG1 of the Income Tax Act 2007. The Court’s interpretation and use of this provision are of interest in that this has implications for professionals restructuring professional practices and setting their salary levels. The Supreme Court dismissed the appeal by Penny and Hooper against the Court of Appeal judgment, and held that their restructuring of their professional practices amounted to tax avoidance.