Chapman Tripp
Added: Feb 8, 2012
This article first appeared in the February 2012 issue of Boardroom magazine.
Tax authorities, including our own Inland Revenue Department, sometimes try to promote the idea that companies must pay their “fair share” of taxes (on a theory of social duty).
The IRD’s compliance document for the 2010-2011 tax year, for example, states: “Taxes pay for healthcare, education, safer communities, welfare and other essential government services. Individuals and businesses that don’t pay their fair share, or claim more than they should, disadvantage other New Zealanders”.
However, just as a company cannot justify paying less tax by arguing that the tax imposed is “unfair”, neither, in my view, can the concept of “fairness” be invoked to induce that company to pay more tax than is legally due. Because tax impacts upon the company’s bottom line and the directors’ duties are owed to the company, not the IRD, there is almost an affirmative obligation to minimise tax within the bounds of the law.