Tax Avoidance



Introduction

"Avoid, evade, what's the difference, so long as you don't pay taxes".

This is the philosophy of many New Zealanders. But it is not one that we should necessarily agree with. Let's face it. Someone has to pay for our roads, our children's education, our old folks, our law enforcement and so on.

But paying more than your legal share? – Now that's a different story. There is every indication that Tax Avoidance is still a growing "industry". It is still fast becoming "the game to play" because some people say they are sick of high taxes and that they have decided to fight back.

There has been much said about Tax Avoidance in recent years with considerable legislation enacted to monitor and control it. More and more taxpayers are now looking at their rights under the tax laws and have come to treat the term "tax avoidance" with far greater respect than in the past.


Tax Planning and Tax Avoidance
There is nothing illegal or immoral about tax avoidance. In fact, tax advisers have a positive obligation to clients to legitimately reduce their tax. Unfortunately for many advisers it is easy to use a professed abhorrence of tax avoidance as a screen for lack of activity or knowledge on their part.

The role of the Tax Planner is to advise on the legitimate courses open to taxpayers wishing to rearrange their affairs to minimise as far as possible the incidence of income tax.


Evasion and Avoidance - the Difference
Evasion has never been an acceptable method of minimising one's taxation. Avoidance however, is a different kettle of fish and the Tax Commissioner must be increasingly amazed at the ingenuity and, in some cases, artificiality of measures that are employed by some taxpayers.

For this reason tax avoidance has graduated to a grey area, but Tax Planning still retains its unsullied nature.

  • Tax Avoidance - is the legal and logical arrangement of one's affairs so the tax legally payable is as less as possible as it could be.

  • Tax Evasion - is the wilful attempt to evade tax by providing false information and records or omitting material that should have been disclosed.

In evasion, there exists the intention to deceive. In avoidance, there is no deceit.