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Griffiths, Shelley --- "Tax as law" [2017] OtaLawRw 3; (2017) 15 Otago LR 49

Last Updated: 3 December 2019


Inaugural Professorial Lecture Tax as Law

Shelley Griffiths*

I have two distinct areas of research: taxation and capital market regulation. That phrase trips off my tongue because I have used it in every promotion or progression application I have ever done and every Performance-Based Research Fund research profile I have ever written. Thinking about this talk made me think whether there was something I could discuss that could link them. As I cannot think of anything that would be not a strained analysis, I have decided not to.

Why such distinct strands of research? When I was a teenager I clearly remember my music teacher telling me, after I could not be at something to do with music because I had some other more pressing commitment, that I was a “Jack of all trades, and master of none”. That might be true, but talking about that would lead me to a more public display of self-reflection than I would ever want to engage in, so I’ll leave that thought right now. The more practical and prosaic reason is that I was hired specifically to teach tax and capital market regulation (or securities regulation as it is often called). University teaching was research informed teaching, therefore that was where my research path lay.

Since I cannot combine the two, I have chosen, as the title of this talk indicates, to talk about my tax research.

What about the tax research? Although there are many amendments to the Income Tax Act every year, the changes rarely make any significant difference to the structure of how we tax “income” in New Zealand. That led me to think that a research trajectory on the substantive provisions of the Income Tax Act was not going to be terribly fulfilling. The one area that did seem a little more fruitful for a long-term research theme was tax avoidance, but that was a very crowded academic space.

Then two things happened. I read an article by Philip Baker, an English tax silk, formerly a full-time academic and currently a visiting Professor at Oxford University. It was entitled “Taxation and the European Convention on Human Rights”.1 In 2003, Sir Ivor Richardson, then recently retired as President of the Court of Appeal, visited the Faculty. Chatting with Sir Ivor he said he had often wondered why the New Zealand Bill of Rights Act 1990 had been used so little in non‑criminal areas of the law. Philip’s article and Sir Ivor’s comment sent

This article is the text of my Inaugural Professorial Lecture delivered at the University of Otago on 30 August 2017 (footnotes added). My thanks go to Dr Ali Clarke, historian of the University of Otago, for alerting me to invaluable archival material used in the preparation of this lecture and its published version.

Phili Baker “Taxation and the European Convention on Human Rights’ [2000 British Tax Review 211.

me off on what has been, and is, the dominant theme of my research.

Is tax public law?2 And if it is, why does it seem so different? Why is tax different? Should it be? There are a number of scholars internationally thinking about this. It is referred to as “tax exceptionalism”.3 But that is only one aspect of a bigger question. In many places and in many ways, tax is thought of as being part of commercial law.4 In that context it also seems quite different from other areas of the law. For many lawyers, and indeed law students, tax is seen as being in its own special box, somehow disconnected from law. It is specialised, distinct, odd, difficult, opaque, weird, not quite like anything else. At least in respect of income tax, that oddness is probably the result of the fact that income tax must be charged on “income”. What income is, is a much more difficult, elusive and illusive concept than we might first think. Income tax legislation deals “with a wholly artificial universe constructed by law”.5 If you are not immediately thrilled by the thought that you are not going to hear about that tonight, let me assure you that you should be.6 My objective in my teaching has been to think of tax as law – and my research has been to think of tax as a species of public law. What I want to do in this talk, is to think about the symptoms and the causes of the apparent oddity that tax is somehow not really law.

So rather than talk about my personal research journey, I thought I would explore the journey of tax as a law subject, both in teaching and in research. It is through that lens that I hope to explore the more general theme of this talk, which is thinking about tax as law.

Fifty years ago, Sir Ivor Richardson as a Professor in the Law Faculty at Victoria University delivered his inaugural professorial lecture. It was entitled “Attitudes to Income Tax Avoidance”. He ended by reflecting

2 Shelley Griffiths “Tax as Public Law” in Andrew Maples and Adrian

Sawyer (eds) Taxation Issues: Existing and Emerging (Centre for Commercial and Corporate Law, Christchurch, 2011) at 215.

  1. Kristin Hickman “Administering the tax system we have” (2014) 63 Duke
    Law Journal 1,717; Richard Murphy “Pragmatic Administrative Law and Tax Exceptionalism” (2014) 64 Duke Law Journal 21.
  2. For example, in the collection of essays published in honour of Sir Ivor
    Richardson by Victoria University, the tax essays and their commentary appear in the “Commercial Matters” section of the collection, David Carter and Matthew Palmer (eds) Roles and Perspectives in the Law: Essays in Honour of Sir Ivor Richardson (Victoria University Press, Wellington, 2002) at 321.
  3. Sian Elias “Righting Environmental Justice” (2014) Resource Management
    and Theory 47.
  4. Ross Parsons “Income Taxation – an Institution in Decay” (1986)
    [1986] MonashULawRw 6; 12 Monash University Law Review 77; John Prebble “Why is Tax Law Incomprehensible” (1994) British Tax Review 380; incidentally both these articles were originally the Inaugural Professorial Lectures of Professors Parsons and Prebble.

on the on-going problems and issues he had discussed by saying this:7

The working out of these problems in legislation and in decisions of the courts will provide a stimulus for those involved in the teaching and studying of taxation law at this University and elsewhere. As with many other developing subjects there has in the past been little systematic study or teaching of taxation law and principles. Its importance in our society and the issues raised, touching as they do economics, accounting, and administration as well as law, makes it eminently worthy of study.

In 1943, the United States Supreme Court said of tax “[N]o other branch of the law touches human activities at so many points”.8 Why twenty years later was its study described as “developing”? By 1967, there was nothing especially new about the phenomenon of taxation. There was a land tax in England when William the Conqueror ordered the Doomsday survey in 1086.9 There was a salt tax in China from about 1000BC.10 The eighteenth-century English “window tax” is relatively well known,11 and the Boston Tea Party protest in response to the English Parliament’s tax on tea in 1773 is probably even better known. In nineteenth century New Zealand, government revenue was raised, in addition to the proceeds of land sales, from a host of excise taxes and duties. A Land Tax Act was passed in 1878. It was in force for barely a year when a change of Government led to it being replaced by a Property Tax Act in 1879.12 The property tax became increasingly unpopular and the Liberal Government enacted the Land and Income Act 1891. Before World War I land tax and excise duties were the principal source of revenue

7 ILM Richardson “Attitudes to Income Tax Avoidance” (1967) 30 The New

Zealand Journal of Public Administration 1 at 15 (emphasis added).
8 Dobson v Commissioner of Internal Revenue 320 US 489 (1943) 476 at 494–495.
9 Barbara Abraham “‘Danegeld’ – from Danish Tribute to English Land

Tax: The Evolution of the Danegeld from 991 to 1086” in John Tiley (ed) Studies in the History of Tax Law Volume 6 (Hart, Oxford, 2013) at 261.

  1. Yan Xu “The State Salt Monopoly in China: Ancient Origins and Modern
    Implications” in P A Harris and D de Cogan (eds) Studies in the History of Tax Law Volume 8 (Hart, Oxford, 2017).
  2. Chantal Stebbings “Public Health Imperatives and Taxation Policy: the
    English Window Tax as an early paradigm in English Law” in John Tiley

(ed) Studies in the History of Tax Law Volume 5 (Hart, Oxford, 2012).

  1. M Littlewood, “In the Beginning: Taxation in Early Colonial New
    Zealand”, in P Harris and D de Cogan (eds), Studies in the History of Tax Law Volume 7 ( Hart Publishing, Oxford, 2015); P Harris, Metamorphosis of the Australasian Income Tax: 1866 to 1922 (Australian Tax Research Foundation, Canberra, 2002); L Facer, “The Introduction of Income Tax in New Zealand” [2006] AukULawRw 3; (2006) 12 Auckland University Law Review 44; J Barrett and J Veal “Land Taxation: A New Zealand Perspective” (2012) 10 eJournal of Tax Research 573; M Daunton, “Land Taxation, Economy and Society in Britain and its Colonies” in J Avery Jones, P Harris and D Oliver (eds) Comparative Perspectives on Revenue Law: Essays in Honour of John Tiley (Cambridge, Cambridge University Press, 2008) 212–218; and A Cho, “The Five Phases of Company Taxation in New Zealand: 1840–2008” [2008] AukULawRw 6; (2008) 14 Auckland University Law Review 150.

but thereafter income tax increasingly became the predominant tax. By 1916, the income part of the statute was in the structure in which it broadly remained until 1994. From World War I, income tax delivered the highest proportion of tax revenue.13 Why then would Professor Richardson describe tax law as a “developing subject” some 80 years after the enactment of the Land and Income Tax Act?

In 2006, I wrote that:14

Tax is a subject lawyers often shy away from. As a result, chartered accountants have established virtual hegemony over tax practice.

By the middle of the twentieth century, the Commissioner of Inland Revenue could report on the close relationship between himself, and the District Commissioners, and the taxation committees of the New Zealand Society of Accountants.15 He reported no liaison or relationship with the Law Societies – almost certainly there was none.

Sir Ivor’s comments acknowledge that tax requires a pluralistic approach. Elsewhere it has been said that into this pluralist enterprise must go law, history, philosophy, political science, economics, and accounting.16 Each of these disciplines has much to contribute to ensure a rich understanding of tax. That multidisciplinary dimension is also part of why tax is endlessly fascinating. Within this framework, legal analysis has an important part to play, so that other disciplines take “into account and properly understand legal systems, rights and obligations, relationships, organisations and procedures”.17 I would agree. However, the point I want to think about tonight is subtly different. I want to think about what might be lost if tax law is isolated from other law. Is there learning in other areas of the law that is being ignored in tax. Alternatively, are other areas of the law missing something by putting tax in, as it were, a sealed box?

13 Shelley Griffiths “The historical meaning of ‘Income’ in New Zealand

statutes, cases and administration, 1891–1925” in P Harris and D de Cogan (eds) Studies in the History of Tax Law Volume 8 (Oxford, Hart Publishing, 2017) at 419.

  1. Shelley Griffiths “Review of ‘Income Tax in New Zealand” (2006) 11 Otago
    LR 331 at 334.
  2. Report of Inland Revenue Department for year ended 31 March 1964 [1964]
    AJHR H–10 7 and 8.
  3. Judith Freedman “Epilogue: Establishing the foundations of tax law in
    UK universities” in John Avery Jones, Peter Harris, and David Oliver Comparative Perspectives on Revenue Law Essays in Honour of John Tiley (Cambridge University Press, Cambridge, 2008) 288 at 290.
  4. Judith Freedman “Epilogue: Establishing the foundations of tax law in
    UK universities” in John Avery Jones, Peter Harris, and David Oliver Comparative Perspectives on Revenue Law Essays in Honour of John Tiley (Cambridge University Press, Cambridge, 2008) 288 at 291.

So before looking at a couple of specific examples that I think shed some light on that, I want to review the teaching of tax at this University and take a brief glimpse at the history of teaching and academic research in tax. Because this is history, it is sure to explain a lot!

Let us first think about the teaching of tax at the University of Otago. Any discussion about the teaching of any subject in law at Otago needs to be thought of in the context of the teaching of law more generally. The full-time University study for an LLB (or joint degree) completed with a post-graduation “professionals” course has been the model since the 1970s. A broad review of legal education since the nineteenth century reveals a rather chequered story with some particularly weak patches. For example, law teaching fell into abeyance at the University of Otago in the very early twentieth century and it rested totally in the hands of the local Law Society.18 In the 1920s the teaching of law in the Colleges of the University of New Zealand was considered to be in such a parlous state that in 1925, the Royal Commission on University Education reported that legal education was on a “very unsatisfactory footing”. It continued:19

Legal practitioners have always been regarded as members of a learned profession, as, indeed, is shown by the customary courtesy of allusion to “my learned friend.” It appears to us that, unless a marked change is effected in the legal education provided in the Dominion, this term runs the risk of being regarded as a delicate sarcasm.

However, the overall trajectory through the twentieth century was toward increasing numbers of full-time staff (with the appointment of its first full time Professor in 1959, Otago was not an especially fast follower of the trend that had long since begun in Victoria and Auckland Universities20); toward full-time students (two years full time at University was recommended from the mid-1930s and full-time students were the norm by the 1970s); and the creation of a Council of Legal Education in 1930 (replacing the judges as the arbiter of content for admission to practise law). The content of the law degree changed surprisingly little and it was as late as around 1970 that there was any choice of papers in addition to a core.

18 M J Cullen Lawfully Occupied Otago District Law Society (Otago District Law

Society, Dunedin, 1979) at 124–125 and generally 111–145; Peter Spiller “The History of New Zealand Legal Education: A Study in Ambivalence” (1993) 4 Legal Educ Rev 223.

  1. Report of the Royal Commission on University Education [1925] AJHR E – 7A
    at 44.
  2. Peter Spiller “The History of New Zealand Legal Education: A Study in
    Ambivalence” (1993) 4 Legal Educ Rev 223 at 232–234 and 243.

In 1927, at Otago the LLB degree consisted of the following study for those who wished to become barristers:21
Year 1 Latin

English or Philosophy Jurisprudence

Constitutional History and Law

Year 2 Roman Law

Law of Property Law of Contract

Year 3 Law of Torts

Criminal Law

Company Law and Bankruptcy

Law of Trusts, Intestate Succession, Administration of Estates of deceased persons

Year 4 Evidence

Practice and Procedure International Law Conflict of Laws

Solicitors could choose one of Latin, English or Philosophy, and did not have to study Roman Law or International Law.

This mixture of some general knowledge plus specialised law subjects had been the norm for a long time. By 1927 “practice and procedure” had made an appearance in the curriculum and that was the first time that Company Law was included in the LLB. The subject had the same lectures, curriculum and teacher as the Faculty of Commerce paper and that was how it remained until the mid-1950s. Interestingly, commerce students studied a quite a lot of law! In 1948 for instance “Accountancy Law” consisted of Mercantile Law I and II, Company Law, Bankruptcy Law, and Trustee Law.22 There was one lecture per subject a week, at 7:45 am Monday to Friday (except in the occasional year when the Monday lecture was substituted for one on a Saturday.)

The law degree therefore had a strong common law flavour, very little emphasis on statute law, and a smattering of what we might call practice oriented subjects. The lack of statute law in the degree might seem somewhat surprising in light of the fact that the New Zealand Parliament enacted 77 public and general Acts in 1927. The eight volumes of the 1931 reprint of the 1908–1931 statutes contained over 1500 statutes. Most of the law students and graduates in the room will recognise a lot of familiar material in that structure. This was the basis of the law curriculum

for a very long time (and in many ways, it still is). New Zealand legal education has been described as being “doctrinally and professionally oriented”.23 This is what has been described in the English context as the “classical curriculum”.24
So, returning to my more specific inquiry – what about tax?

As far as I have been able to ascertain, tax in any form was taught for the first time at Otago in 1914. “Preparation of tax returns” was one of the topics in a subject called “Advanced Book Keeping” in the Faculty of Commerce.25 By 1920, the Land and Income Tax Act 1916 was one of the statutes included in the “Accountancy Law” course studied in the Faculty of Commerce.26 The need for accountants to be able to do this sort of work is not surprising. By 1914, there were 14,277 income tax returns filed and by 1929 that number had grown to 55,235.27 Many small traders and businesses no doubt required the services of an accountant to complete these returns. It is no wonder that accountancy education responded by providing the skill and knowledge. In one form or another, taxation has been continuously taught to accountancy students for over 100 years.

In 1953, taxation finally made its way into the law degree when the subject “Conveyancing” was amended to become “Conveyancing and Taxation”.28 ‘Conveyancing’ had been taught since 1928 and was at first called “practical conveyancing”. The 1958 prescription for “Conveyancing and Taxation” described the taxation content as “the law relating to land and income tax, gift duty, death duty, conveyance duty.”29 We will return to the influence of estate and gift duty later.

23 Stuart Anderson “Comment: Putting Professor Crespi’s Question in

Context” [1996] OtaLawRw 9; (1996) 8 Otago LR 599 at 601; Professor Crespi’s question was why there was no study of economics and the law in New Zealand, see Greg Crespi “Filling a Gap in New Zealand Legal Education: the Economic Analysis of Law” [1996] OtaLawRw 8; (1996) 8 Otago LR 589; generally on that issue see Shelley Griffiths “A Short History of ‘Law and Economics’ in New Zealand” in Shelley Griffiths, Mark Henaghan and M B Rodriguez Ferrere The Search for Certainty Essays in Honour of John Smillie (Thomson Reuters, Wellington, 2016).

  1. John Tiley “50 Years: Tax, Law and Academia” (2006) British Tax Review
    229 at 231.
  2. T K Cowan Commerce at Otago 1912–1987: A personal perspective (Faculty
    of Commerce, Dunedin, 1988) at 6 (generally see 4–13).
  3. Calendar for the Year 1914 (University of Otago, Dunedin, 1914) at 231 and
    Calendar for the Year 1920 (University of Otago, Dunedin, 1920) at 150.
  4. New Zealand Official Year Book, 1914 and 1930; <

28 Calendar for the Year 1953 (University of Otago, Dunedin, 1953) at 132.

  1. Calendar for the Year 1958 (University of Otago, Dunedin, 1958) at 159; the
    statutes studied were Estate and Gift Duties Act 1955, Land and Income Tax Act 1954 and Stamp Duties Act 1954.

In 1967, there was a major change to the structure of the LLB degree and “conveyancing and taxation” ceased to be a subject in the degree. Until 1972, taxation continued to be taught in a composite subject with conveyancing, but it was one of the subjects that had to be passed in addition to the LLB degree for admission to practise as a barrister and solicitor. In 1972 choice appeared in the subjects for the degree and “Taxation and Estate Planning” became an optional paper within the degree but one that remained compulsory for admission.30 Thus it broadly remained until the end of the 1980s when a taxation paper was optional for the degree and the professional qualification was altered to a stand-alone programme administered outside the Universities and in which taxation did not and does not feature.

This brief story (set in the larger context of the development of legal education in New Zealand) indicates that at the University of Otago some studies in taxation have been compulsory for accountancy students since 1914. For law students, there was no opportunity to study tax until 1953 and for a 35-year period it was a compulsory requirement for admission to practise law. Since then, it has been optional. Notably also, when it was compulsory (either in the degree itself or in the professional examinations) it was almost always coupled with “Estate Planning”. Tax was therefore studied by lawyers in an instrumentalist manner.

Let us turn now to academic research on tax through a legal framework. I conducted a very simple survey by looking at publications in two academic law journals, the New Zealand Universities Law Review, published first in 1963, and, to keep this homely, the Otago Law Review first published in 1965. The results of this simple survey did not particularly surprise me.
30 Calendar for the Year 1972 (University of Otago, Dunedin, 1972) at 212;

For a fascinating contemporary insight to issues in legal education in this period see P B A Sim “Legal Education in New Zealand: A Symposium: The Ormrod Report and Legal Education in New Zealand”, D P Derham “Commentary”, B L Stanley “Commentary”, ILM Richardson “Commentary” [1973] OtaLawRw 7; (1973) 3 Otago LR 76.

Legal writing on taxation in academic journals – 1960s–1999 New Zealand Universities Law Review

Years Number Topics

1960s 1 Valuation of trading stock

1970s 2 Estate duty/ alienation of income

1980s 1 Should we have a capital gains tax

1990s 4 Avoidance – 3

Tax policy development – 1

Total 8

Otago Law Review

Years Number Topics

1960s 1 Estate planning

1970s 2 Definition of income

1980s 2 Definition of income

1990s nil

Total 5

This is a somewhat distorted picture in the later part of that period. John Prebble in particular produced a significant body of work from the 1980s. Nevertheless, the figures give a useful flavour of the extent of academic legal publications in tax and also highlight the topics that seemed important. Again, we note the role of estate planning and the influence of death duties. We note also the ongoing issue of what is “income” that income tax is levied on.

The importance of those topics can be seen also in two major extended treatments of taxation issues published in two books. The first, was a revised edition of a book on Estate Duties edited by ILM Richardson (assisted by R L Congreve and YFR Grbich). The 1970 edition remained practitioner focussed as the work had been since its first edition in 1941, but it was extremely academically rigorous and still remains a useful resource.31 The second is John Prebble’s work on the taxation

Adams and Richardson Law of Estates and Gift Duties (4th ed, Butterworths, Wellington, 1970); this was the first edition co-edited by ILM Richardson and there was a subsequent edition in 1978. F C Adams was inter alia registrar general of land and the author of Adams Land Transfer Act. The first edition of The Law of Estate and Gift Duties in New Zealand was published in 1941.

of property transactions in New Zealand.32 This is probably the first academic legal monograph published on taxation in New Zealand. Those issues of “definition of income” that drove some of the publications in academic journals were explored in depth by John Prebble and finally many of the ambiguities in the income sections were addressed in the Income Tax Act 1994. What is also notable, that although the 1980s was a period of significant tax reform, including the introduction of goods and services tax, there was very little legal academic writing about it. In my less than random sample from a couple of academic law journals shows, that period did not foster much engagement in such writing although lawyers were involved to some degree in the various advisory committees involved in the reviews.

My review of the Annual Reports of the Law Faculty and University of Otago Calendars suggests that the first tax article written by an Otago law academic was by Andrew Beck in 1987.33 The title was “Tax and the Academic: A Raw Deal” in which he reviewed the income tax deductibility (or more accurately non-deductibility) of research and education costs incurred by academics!34

In February 1996, a specialist academic journal, New Zealand Journal of Taxation Law and Policy, was launched. Sir Ivor Richardson’s remarks at the launch appeared in the first edition. He said, “more than with most specialities, tax work requires an understanding of policies underlying the legislation.” There were various reasons for this. No other legislation was as “far reaching and pervasive”. The subject matter it dealt with was consequently “comprehensive and complicated” and because the legislation can never be a complete code those who interpret it and administer it ought to have a “clear understanding of the economic social and administrative policies” underlying the legislation. Yet, “only a handful of major policy and principle oriented articles on tax subjects have been published in New Zealand in recent years.” The Organisational Review of the Inland Revenue Department that Sir Ivor had chaired in the early 1990s had “found a real dearth of research, analysis, and writing on tax administration.” Tax administration had

32 John Prebble The Taxation of Property Transactions (Butterworths,

Wellington, 1986).

  1. Faculty of Law Annual Reports, 1952–1982, University of Otago, Records
    of Registry and Central Administration, AG-180-7/05 - 13, Hocken Collections.
  2. Andrew Beck “Tax and the Academic: A Raw Deal” [1987] NZLJ 35.
    Although Andrew’s predecessor in teaching tax, Ian Williams, is shown to have been publishing, none of his work was, as far as I have been able to find out, on tax. Professor Peter Sim did publish an article on tax, but it was while he was at Auckland University, so that does not count, Peter Sim “Lessening the Burden of Taxation: A Breakthrough for the Commissioner of Inland Revenue” (1968) 3 Recent Law 2 (Part 1) and 34 (Part 2).

not been a major field of research even though it raised “major questions as to the application of public law values.” The journal was designed to fill the gap.35 Although I did not actually read that until somewhat after I had begun writing about tax administration, I guess I might say that my own research fits into this gap.

Why was all this so? I think the reason why tax was treated as important for commerce students, and more specifically accountancy students, is both self-explanatory and self-perpetuating. Preparation of tax returns for small, medium and large businesses and individuals provided both a stream of work and was (and is) the supply of a necessary service. The dominance of the accounting profession in tax discourse and interaction with the Inland Revenue Department was a natural consequence of that.

The reasons why tax remained ignored by legal education and lawyers are, I venture, much more complex. Legal education in New Zealand was for a very long time tightly prescribed, common law focussed and strongly shaped by the needs of practice. Once estate planning became important in the 1950s and given further impetus in the wake of the 1968 Estate and Gift Duties Act, legal education took more notice.36 That is not to say there were no cases on tax litigation in New Zealand. For example, between 1891 and 1925 there were 31 reported decisions on income tax.37 Indeed, in the biography of Sir Wilfrid Sim, a distinguished advocate and later King’s Counsel, in Christchurch and later Wellington for many years after 1920, his career at the Bar is described as specialising in “commercial and revenue law”.38 But it seems to me, that tax has been seen as peripherally important within law and legal education.

This is not confined to New Zealand. In the United Kingdom tax has been taught in Law Faculties only since the 1950s, and in 1958 it was

35 ILM Richardson “Launch of Journals by Sir Ivor Richardson” (1995) 1

New Zealand Journal of Taxation Law and Policy 196, 196–197.

  1. On the significance of the 1968 Act see ILM Richardson “Preface”
    ILM Richardson Adams and Richardson’s Law of Estate and Gift Duties (4th edition, Butterworths, Wellington, 1970) at v: generally on estate and gift duties in New Zealand see Michael Littlewood “The History of Death Duties and Gift Duty in New Zealand” in John Tiley (ed) Studies in the History of Tax Law Volume 5 (Hart, Oxford, 2012) at 317.
  2. Shelley Griffiths “The Historical meaning of ‘Income’ in New Zealand
    Taxation Statutes, Cases and Administration, 1891–1925” in P A Harris and Dominic de Cogan (eds) Studies in the History of Tax Law Volume 8 (Hart, Oxford, 2017) 419 at 431; this does not include the statistics on land tax cases and is for the period when there were compared with later years relatively few income tax payers.
  3. G P Barton “Wilfrid Joseph Sim” <

taught only at London University and at postgraduate level.39 The broad similarity in the structure of New Zealand and United Kingdom degrees hints at a certain similarity of attitude.

I have always begun my tax classes by talking about one of the key differences between tax law and other branches of the law and that is that there is no mischief in a tax. The law generally responds to right wrongs, to mediate relationships, to allocate risk, to punish and deter. It responds to things such as “he hit me”, “there is a snail in my ginger beer”, “your contaminant leaked into my water supply”, “your fence is on my property”, “you sold me a machine and it does not work”. There is no such mischief in a tax. Tax is designed to raise revenue.40 The Bill of Rights in 1689 established that there could be no taxation without the consent of the taxpayer and taxes therefore had to be levied by statute.41 From the start, this gave tax a public character. Now it might be thought that this made tax unambiguously law, quintessentially law. But it has been noted that this fact actually set it apart from the law as it was usually practiced. Most of those engaged in the practice of law were concerned on a daily basis with private law of property, contract, wills and succession.42 That of course is the law the classical legal training prepared students for. A nineteenth century lawyer might have said of tax, “It is Law, but not as we know it”. The rise of the regulatory state in the twentieth century,43 of which tax is an integral part, has changed that, but old habits always run deep.

The consequence of this principle of consent was that tax legislation had to be written as clearly and unambiguously as possible. Tax could only be levied by very clear provisions. That had a number of consequences. First, because tax is a technical matter as many situations as possible need to be covered in the legislation. Because of that need for certainty and clarity of statutory ambit, statutes became ever longer and more complex.

39 John Tiley “50 Years: Tax, Law and Academia” (2006) British Tax Review

229 at 235; the academic credited with being the driving force toward teaching tax in English law faculties was G S A Wheatcroft. While Dean of the Law Faculty at the London School of Economics, Wheatcroft visited the Otago Faculty in 1966. There is no evidence that he left behind any interest in tax as an academic subject, University of Otago, Records of Registry and Central Administration ‘Annual reports of the faculties’ AG-180-7/0 9 [1966–1968] 16 March 1966, Hocken Collections.

  1. The purpose of the Income Tax Act 20017 s AA1 is to ‘define, and impose
    tax on, net income; to impose obligations concerning tax; to set out rules for calculating tax’. This is rather different from the usual purpose section in a modern statute.

41 Constitution Act 1986, s 22.
42 Chantal Stebbings “John Tiley, 1941–2013” in Biographical Memoirs of

Fellows of the British Academy, XVI available at < publications/john-tiley-1941-2013>.

  1. Martin Daunton Trusting Leviathan; the politics of taxation in Britain, 1799–
    1914 (Cambridge University Press, Cambridge, 2001) and Martin Daunton Just taxes: the politics of taxation in Britain, 1914–1979 (Cambridge University Press, Cambridge, 2002).

Secondly, because of the constitutional nature of taxation, tax statutes were interpreted strictly, literally.44 By the last quarter of the twentieth century, that alone distinguished tax statutes from other legislation.

Additionally, as a sheer practical matter, administrators had to take a prominent role in the interpretation of statutory provisions. The primary role of assessment, the quantification of a tax liability, lay with an official, a member of the executive branch of government. In New Zealand that person is the Commissioner of Inland Revenue.45 That very act of assessment required administrative interpretation of the legislation. This level of bureaucratic engagement is another point of distinction between tax law and most other areas of the law. Perhaps it is not surprising that tax was perceived as administrative regulation rather than law.

Discussing the evolution of the academic study of tax law in Britain, Chantal Stebbings has written:46

Sitting in this way outside the norms of the legal system in its key elements, at best perceived as distinct from other branches of English law and at worst as not law at all, tax was not embraced within the academic study of law in Britain.

It seems to me that the same is largely true in New Zealand. Does this isolation of tax law matter? Is this just an interesting tale? Well I think it does matter. Elsewhere I have described this as the ghettoization of tax law47 and I want now to turn to two short examples of why I think this does matter.

The first concerns the Commissioner of Inland Revenue’s power of search and seizure, and the second the search for explanations of why

The classic statement is in Cape Brandy Syndicate v Inland Revenue Commissioners [1921] 1 KB 64 at 71; ‘In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment.’ (Rowlatt J); Mangin v Commissioner of Inland Revenue [1971] NZLR 591 at 594 (PC); John Prebble “The Interpretation Provisions in the New Zealand Income Tax Act 1994” (1999) 30 VUWLR 49; Susan Glazebrook “Statutory Interpretation, tax avoidance and the Supreme Court: reconciling the specific and the general” Paper prepared for the New Zealand Institute of Chartered Accountants 2013 Tax Conference available at <www.‑list-2013>.

Tax Administration Act 1994, Part 6; Lloyd’s Bank Export Finance v CIR (1991) 13 NZTC 8,134 at 8,137–8,138 (PC); R v Deputy FT exp Hooper [1926] HCA 3; (1926) 37 CLR 368 at 368.

Chantal Stebbings “John Tiley, 1941 – 2013” in Biographical Memoirs of Fellows of the British Academy, XVI available at < publications/john-tiley-1941-2013>.

Shelley Griffiths “Book Review: Ten Years of Tax: A Celebration of Professor Michael Littlewood’s First Decade at the University of Auckland Faculty of Law 2003–2013 by Aditya Basrur, Christopher Jenkins, James Ruddell and Sehj Vather (eds) (Centre for Commercial and Corporate Law Inc, University of Canterbury, Christchurch, 2016)” (2017) 23 New Zealand Journal of Taxation Law and Policy 173 at 175.

New Zealanders appear somewhat cavalier about the niceties of the law of trusts.

The New Zealand Commissioner of Inland Revenue (the “Commissioner”) has at “all times full and free access to all lands, buildings and places” and documents that are “consider[ed] necessary or relevant” for the purpose of carrying out any of the Commissioner’s functions. A warrant is required for access to a private dwelling.48 There appear few constraints on this power. The Commissioner does not have to have formed a view that there are not less intrusive ways of getting information, or that a taxpayer may have failed to discharge his or her obligations. The Commissioner has no obligations to meet any objective test on when to engage this power. Applied literally, the Commissioner or an authorised officer could enter any business premises at any hour of the day or night because all business premises will surely contain information that is “necessary or irrelevant” to the Commissioner’s obligation to assess tax liability. On the other hand, section 21 of the New Zealand Bill of Rights Act 1990 (“NZBORA”) states that “everyone has the right to be secure against unreasonable search or seizure, whether or the person, property, or correspondence or otherwise.” NZBORA permits limitations to the rights and freedoms protected in it “only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.”49 Section 16 sits in a somewhat uneasy relationship with NZBORA,50 but that is not a matter I wish to discuss here.

Given the nature of search and seizure powers, their potential for abuse and the protected right in NZBORA, it is not surprising that there have been reviews about the nature and extent and the controls over the powers of search and seizure. The New Zealand Law Commission conducted in-depth reviews in 2002 and 200751 and has recently revisited the issue.52 The 2002 preliminary paper on “entry, search and seizure” reviewed the scope and adequacy of current powers to search persons

48 Tax Administration Act 1994, s 16(1) and 16(4).
49 New Zealand Bill of Rights Act 1990, s 5.
50 Avowal Administrative Attorneys v District Court at North Shore [2010] NZCA

183[2010] NZCA 183; , [2010] 3 NZLR 661; Tauber v Commissioner of Inland Revenue [2012] NZCA 411, [2012] 3 NZLR 549; Wojcik v Police (1996) 17 NZTC 12,646 (HC) (compare the outcome in R v Wojcik (1994) 11 CRNZ 463 (CA) and R v BW DC Tauranga CRI-2011-070-3626, 26 June 2012; generally, on New Zealand Bill of Rights Act 1990, s 21 see Andrew Butler and Petra Butler The New Zealand Bill of Rights Act: A Commentary (2nd edition, LexisNexis, Wellington, 2015).

  1. Law Commission Entry, Search and Seizure A discussion paper (NZLC PP50,
    2002) and Law Commission Search and Surveillance Powers (NZLC R97, 2007).
  2. Law Commission Review of the Search and Surveillance Act 2012 (NZLC IP
    20, 2016).

and places. It categorised the range of such powers into two groups:53

From that categorisation, the Law Commission went on to develop appropriate principles to constrain and supervise the use of these powers. The aim was to develop a set of rules that ought to apply to every such power and the content of those rules would depend on the category into which the power fell.

The proposed rules governing the entry onto land “by way of administrative inspection” for Group 1 powers included:

Different rules were required for group 2 powers where “an individual is suspected of criminality” and in those circumstances, additional protections were required.

The Report classified the power in TAA 1994 section 16 as a Group 1 power.54

The 2002 Report presumed, without any substantive analysis, that the Commissioner’s powers concerned routine administrative matters only. While there is no reason why the Commissioner cannot use this power for administrative purposes, it is clear from the Commissioner’s own Operational Statement that that is not the predominant use made of it. The Commissioner also has a power to require information to be disclosed and it is that power that the Commissioner uses frequently and routinely.55 It is perhaps not surprising that the section 16 search and seizure power is used in the more serious situations. The specific examples the Commissioner describes are:56

53 Law Commission Entry, Search and Seizure A discussion paper (NZLC PP50,

2002) at 3.

  1. Law Commission Entry, Search and Seizure A discussion paper (NZLC PP50,
    2002) Appendix A at 24.

55 Tax Administration Act 1994, s 17.

  1. “OS 13/01 The Commissioner of Inland Revenue’s search powers” (2013)
    25(8) Tax Information Bulletin 1 at [31].

The power might also be used to address problems of “aggressive tax planning and tax avoidance.” The first three categories involve some offence. The major cases in which the courts have considered the scope of this power have fitted within these parameters.57 Aggressive tax planning and tax avoidance are not illegal per se, although they may attract a penalty that has been categorised by the Supreme Court as “penal” in nature.58 Thus, the predominant use made of section 16 would seem to fall within the law enforcement function from which the Law Commission 2002 Report specifically excluded the Tax Administration Act 1994.59 To put it bluntly, the power was incorrectly categorised. In reality, perhaps uniquely, the Commissioner’s power of search and seizure falls into both categories 1 and 2.

In a full-scale review of search and surveillance, the true nature of the Commissioner’s powers was not considered. There is much to ponder about section 16. This evening is not the time for that – but I might be so bold as to suggest that a major review of all such powers in New Zealand legislation was the appropriate time.

Turning now to my second example. The use of domestic trusts by many New Zealanders has been for a number of years a cause of concern. This concern has been apparent in the courts, especially in relationship property cases, and in academic writing. In 2002, the Law Commission published a report, Some Problems in the Law of Trusts.60 In 2009, it embarked on a major project on the law of trusts. This began with an issues paper in 2009 and ended with a draft Trust Act in 2013.61 At the heart of these concerns was the observation that settlors were essentially ignoring trust law and continuing to treat trust property as if it were still their own. Indeed, the Law Commission stated that in some cases, settlors were acting “as a principal would in an agency.”62

The Law Commission identified that income tax, and previously, estate duties were a significant reason why New Zealanders were so fond of trusts. Having made that connection, the next step might have to ponder the consequences of the fact that the main context in which people interact with trusts is a tax context. Related to that, the professional adviser they are most likely to engage with in the formation and management of trusts would, one would think, be their tax adviser.

57 Avowal Administrative Attorneys v District Court at North Shore [2010] NZCA

183[2010] NZCA 183; , [2010] 3 NZLR 661; Tauber v Commissioner of Inland Revenue [2012] NZCA 411, [2012] 3 NZLR 549.
58 Ben Nevis v Commissioner of Inland Revenue [2008] NZSC 115 at [180].
59 Law Commission Search and Surveillance Powers (NZCLC R97, 2007) at

60 Law Commission Some Problems in the Law of Trusts (NZLC R79, 2002).
61 Law Commission Review of Trust Law in New Zealand: Introductory Issues

Paper (NZLC IP19, 2009); Law Commission Review of the Law of Trusts: a Trust Act for New Zealand (NZLC R130, 2013).

  1. Law Commission Some Issues with the Law of Trusts in New Zealand: Review
    of the Law of Trusts Second Paper (NZLC IP20, 2010) at [5.5].

Might then many people think of trust law and the tax rules about trusts as being synonymous? If we are troubled that New Zealanders appear to ignore trust law, that settlors treat trust property as their own, that many treat a trust relationship as if it were an agency relationship might it be a useful idea to analyse the rules they encounter on a regular on‑going basis? The rules they encounter in practice (and their advisers deal with on a daily basis) might provide a clue to enriching understanding of how people act. Although the Law Commission Report used tax law when considering how to formulate “look through” provisions to deal with misuse of trusts,63 there appears no broader engagement with the substantive tax rules about trusts.

The New Zealand treatment of trusts for income tax purposes is unusual internationally. It is described as a “settlor based” regime because the taxation of the trust turns on the residence of the settlor. It has been said that the “New Zealand rules operate on the principle that the trustee is an agent for the settlor as a matter of economics rather than law.” That is to say the trustees “carry out the functions with respect to trust property that the settlor would do for themselves had they not transferred the assets.”64 This is not the moment for an extensive consideration of the intricacies of the taxation of trusts. However, the general point I want to make is that, for good tax policy reasons, the tax rules are predicated on economics rather than trust law. In other ways, the tax rules appear inconsistent with the underlying truth of trust law that the settlor settles the property on trustees and goes off to the modern equivalent of the Crusades. For example, the Income Tax Act 2007 makes it explicit that a settlor is liable “as agent of the trustee for income tax payable by the trustee”.65 Further, in relation to certain provisions making gains from land transactions subject to income tax, settlors are ‘associated persons’ of the trustees of a trust they settle, and of the beneficiaries of a trust they settle. Trustees of different trusts with the same settlor are also “associated”.66 To put it in unacceptably simple language, settlors have an on-going resonance in tax trust rules. The concept of agency is overtly embraced in the tax rules on trusts. I ought not to be taken as suggesting that such an analysis would have provided the Law Commission with a simple answer to the question it set out to consider. But I do think that ignoring the tax trust rules left a fertile avenue of analysis unexplored.

63 Law Commission Some Issues with the Law of Trusts in New Zealand: Review

of the Law of Trusts Second Paper (NZLC IP20, 2010) at [3.44]–[3.58].

  1. Craig Elliffe International and Cross-Border Taxation in New Zealand
    (Thomson Reuters, Auckland, 2015) at [2.5.2].

65 Income Tax Act 2007, s HC29(2).
66 Income Tax Act 2007, ss YB7, YB8 and YB9.

These two examples suggest that treating tax as “law” but not as we know it, leaving it disconnected from the rest of the law is, at best, unfortunate. It has been my ambition as a teacher and a researcher to open the connections between tax and the rest of the law. It is to that pursuit, I will now return.

And that is tax – commerce, history and law. Perhaps this has been the map of my academic journey after all.

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