Browsing by Author "Smith, Andrew M C"

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Open Access
Can A Poll Tax Ever Be Acceptable? - Evidence from Colonial New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2008) Fowler, Carolyn; Smith, Andrew M C
Poll taxes, while simple in concept, have a regressive effect and unsurprisingly are usually unpopular for this reason which is why they are not commonly used today. Poll taxes were imposed in 19th century New Zealand, with one of the earliest being a form of poll tax imposed by the Nelson Province in 1856 to fund public education. Despite the inherent shortcomings of a poll tax, the Nelson education tax was eventually accepted and defended by the community and produced revenue to fund public education. This paper examines the history of the Nelson poll tax to determine why it was successful when elsewhere, both in earlier and later times, poll taxes have been the focus of considerable dissent which has eventually lead to their demise. Among other reasons, the poll tax revenue being ear-marked for a specific purpose that was perceived by the wider community as important was a major factor in the success of the tax.
Open Access
Consumption Taxes in Developing Countries – The Case of the Bangladesh VAT
(Te Herenga Waka—Victoria University of Wellington, 2011) Smith, Andrew M C; Islam, Ainul; Moniruzzaman, M
In common with many developing countries, Bangladesh faces problems in raising sufficient tax revenues to fund its economic and social development. To address this problem and to improve economic efficiency and growth, a major tax reform program was initiated in 1991 which centred on the introduction of a valued-added tax (VAT) to replace a range of narrowly-based consumption taxes. This paper revisit the basic structure of VAT system of Bangladesh and attempt to analysis the contribution and performance of VAT in Bangladesh as comparing to other developing countries and also attempt to identify and provide some suggestions in possible area where attention and improved performance are required to enhance the contribution of VAT in economic development of Bangladesh. The relevant data shows that the performance of VAT was quite satisfactory in the initial years - but subsequently VAT collection has remained stagnant at a certain level. As a result, VAT is unable to meet the objectives for which it was introduced. The reasons behind this performance are many, such as: a relatively small number of VAT tax-payers, a general lack of awareness, and a weak monitoring system etc. There is still scope for improving the revenue collection from VAT: by increasing the number of VAT taxpayers; reforming the VAT administration; creating intensive awareness among the people, revisiting the list of VAT exempted items and increasing the efficiency of the monitoring system.
Open Access
Double Tax Agreements and the Arm's Length Principle: the Safe Harbour Ratio in New Zealand's Thin Capitalisation Rules
(Te Herenga Waka—Victoria University of Wellington, 2005) Smith, Andrew M C; Dunmore, Paul V
The opportunities for international tax avoidance through the shifting of profits between jurisdictions is increasing as the world’s economy becomes more integrated. While transfer pricing has been the primary method for multinationals to shift profits, thin capitalisation arrangements have been seen by some multinationals as an alternative as transfer pricing practices have become subject to greater scrutiny by revenue authorities. As a result many OECD members have over the last decade introduced specific rules to deal with thin capitalisation arrangements. New Zealand introduced thin capitalisation rules (along with revised transfer pricing rules) in 1995. At the time of their introduction there was no consideration of any kind as to the relationship between these new thin capitalisation rules and New Zealand’s existing DTA obligations. This omission is notable given that existing DTA obligations could override the new thin capitalisation rules or instead the new rules could potentially override existing DTA obligations. The objective of this article is to review New Zealand’s thin capitalisation rules enacted in 1995 to determine whether they can be considered consistent with the arm’s length principle found in New Zealand’s DTAs.
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Employee Reporting in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 1985) Smith, Andrew M C
It has been widely advocated that relationships between management and employees could be improved if the communication between the two parties was more effective. In an effort to encourage effective management/employee communication, many companies have made a practice of issuing specialised annual reports to their employees -called "employee reports". These reports typically contain a simplified presentation of the information provided to shareholders in the company's annual report, with an explanation of financial terminology; a message from the company chairman or executive director and numerous photographs of company employees at their place of work. The objectives of this study were in three areas. The first objective was to research the incidence of employee reporting currently undertaken in New Zealand. The second objective was to research employer attitudes and experiences to employee reporting and the third, to research employee attitudes and reactions to employee reporting. Results obtained indicated that employee reporting has become an established practice in New Zealand. Larger companies (based on the number on employees) were more likely to issue employee reports as were companies that operated from a variety of separate geographical establishments. Employee reports surveyed generally contained a simplified presentation of information presented to shareholders and little additional disclosure beyond that in the statutory accounts. Little of the content was future oriented, and most of the information presented was global in nature, despite clear evidence from employees of their preference for disaggregated information about their immediate place of work. An overall review of the reports suggested that most of the reports were public relations documents designed to convey a favourable impression of the company without attempting to meet reasonable information needs of employees. Results from the research undertaken into employer attitudes show that most employers undertake employee reporting with the main objectives of encouraging a sense of responsibility in their workforce, enabling the firm's financial position to be better appreciated and motivating employees more in the affairs of the company. Employers generally appeared perceptive as to what material employees would like to see in an employee report, but in practice few employers were willing to include such information in their own reports. This may indicate that employee reports are merely condensations of the annual report sent to shareholders or that commercial confidentiality is more important than has been recognised earlier. On the other hand, some companies did not issue employee reports for such reasons as commercial confidentiality and risks of information being misunderstood by employees. Surveys of employees in three companies revealed that most employees found the employee report of interest and regarded it favourably. However many felt the employee report should have given more information especially disaggregated information about how their particular division or plant has performed. The issue of employee reports in many cases has appeared to stimulate demand and inquiries from employees for further information about their place of work. Finally recommendations were made to employers for effective employee reporting based on the results obtained in this study.
Open Access
New Zealand’s Social Security Conventions: Merely Double Taxation Agreements In Reverse?
(Te Herenga Waka—Victoria University of Wellington, 2009) Smith, Andrew M C
In common with many countries, New Zealand provides a comprehensive range of social security benefits for its residents. As New Zealand has traditionally been a country that attracts migrants and, more recently, a source of migrants for other countries, cross-border issues relating to social security benefits are an important issue both for the individuals concerned and also the New Zealand Government. It is for this reason that many countries, including New Zealand, have entered into bilateral treaties (known as “social security conventions” or SSCs) to coordinate the provision and funding of social security benefits across borders. Because SSCs are international treaties, they have implications not only for those individuals who fall within their scope, but also for the governments who are signatories to them. The most important SSCs New Zealand has negotiated are the ones with Australia and the UK because of the substantial migration flows between New Zealand and these two countries. Both these SSCs are very different to the other six negotiated in the 1990s which is probably because New Zealand entered into these SSCs long before it decided to provide general portability of New Zealand Superannuation to other countries. As a consequence, the benefits payable under these two SSCs to New Zealanders who retire in Australia or the UK may be less than what is payable now under the general portability provisions for New Zealand Superannuation. In this respect SSCs differ from double tax agreements (DTAs) which are usually invoked to provide relief for a taxpayer and do not make a taxpayer worse off. The coordination of social security benefits with Australia has its own issues due to the free movement of labour between the two countries under the trans-Tasman Travel Arrangement and also because Australia has adopted retirement income policies that are substantially different to New Zealand’s. The SSC with Australia is unusual in that it may leave New Zealand retirees resident in Australia much worse off than if they had claimed New Zealand Superannuation under the general portability provisions and retired elsewhere. The SSC also has significant fiscal risks to New Zealand if large numbers of Australians decide to retire in New Zealand. The general portability provisions have a Pacific Islands option which is generous to Pacific Islanders who can retire back to their countries of origin with New Zealand Superannuation at full rates free of New Zealand tax after 20 years of New Zealand residency. When the Social Assistance (Payment of New Zealand Superannuation and Veteran’s Pension Overseas) Amendment Bill 2009 is passed, the general portability provisions for other countries will be closer to the provisions for Pacific Island portability, however, a much longer period of New Zealand residency will be required for overseas payment of New Zealand Superannuation at full rates. The general and Pacific Island portability provisions can also be criticised on grounds that the payment of New Zealand Superannuation overseas without any deduction of New Zealand tax is unfair when the benefit is fully taxable when to paid to retirees living in New Zealand. Both portability provisions can also be criticised on equity grounds that they may place retirees to Pacific Island and other countries in a much better position than those who retire to Australia and have payment of New Zealand Superannuation denied to them under the Australian SSC.
Open Access
New Zealand’s Thin Capitalisation Rules and the Adoption of International Financial Reporting Standards in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2007) Nethercott, Les; Smith, Andrew M C
In response to Australia’s decision to adopt international financial reporting standards (IFRSs) from 2005, New Zealand has subsequently decided to follow. New Zealand reporting entities are required to adopt IFRSs from 2007 with the option of early adoption from 2005. As New Zealand is one of many jurisdictions where different rules are employed to determine income for financial reporting and tax purposes, it would seem to a casual observer that the adoption of IFRSs in New Zealand is unlikely to have any income tax implications for New Zealand companies. This is not entirely correct. There are links between financial reporting standards and the determination of taxable income under New Zealand income tax law in respect of certain matters. One such area is the application of the New Zealand thin capitalisation rules in subpart FG of the Income Tax Act 2004. The rules rely upon values taken from a taxpayer’s financial statements to determine the taxpayer’s debt percentage and consequently the extent to which a deduction for interest expense will be apportioned. Therefore the adoption of IFRSs in New Zealand potentially could affect a taxpayer’s New Zealand tax liability if the thin capitalisation rules have application. This paper seeks to examine the changes in IFRS and their impact on the New Zealand thin capitalisation provisions. In particular it will examine the changes in the IFRS Standards concerning the measurement and valuation of assets and the effect on the safe harbour provisions. In addition, the paper will consider the implications for tax advisers and their clients in complying with the new standards and the transitional issues involved.