Background to the Income Tax Act 2007

The first stage of the rewrite programme reordered and renumbered the Income Tax Act 1976 and set out the core provisions in Part B of the ITA 1994 with an alphanumeric numbering system.

In 1996 the second stage rewrote the core provisions and changed the structure of the Act so that it operated on a gross basis for the determination of income and deductions.

The third stage rewrote Parts C to E and Y into plain language and restructured those Parts to provide a link back to the rewritten core provisions (in Parts A and B). Individual provisions are organised into a more logical scheme.

The fourth stage rewrites parts F to Y of the ITA 2004 as well as the schedules to that Act.  The Act also makes consequential amendments to Parts A to E to highlight the relationship between provisions in Parts F to Y with the core provisions, and to move income rules to Part C, deduction rules to Part D, and timing rules to Part E.  This rewriting is not intended generally to change the effect of the law.

The intention of the drafting of the ITA was to ensure no change to the pre-existing law was made, except in respect of a limited number of intended policy changes.

When reporting back the ITA 2004, the Finance and Expenditure Committee (FEC) noted that unintended changes in the law may arise from the difference in language between the old and new Acts, notwithstanding the best efforts of the drafters to avoid this.

The FEC proposed the appointment of an independent committee to review submissions regarding any differences between the two Acts and to recommend appropriate action.  The Rewrite Advisory Panel has been invited to take on this role, in respect of both ITA 2004 and ITA 2007.

A formal process was called for to identify such issues and refer them to the Government for consideration.

Upon identification of an unintended legislative change, the Government will decide whether to:

• promote an amendment to reinstate or modify the meaning of the pre-existing law, or
• retain the unintended change in the legislation.

The Government will also decide whether the issue merits wider consultation under the generic tax policy process, e.g. whether a Government Discussion Document is warranted.

The Rewrite Advisory Panel is chaired by David McLay and includes representatives from the New Zealand Institute of Chartered Accountants (NZICA), the New Zealand Law Society (NZLS), Treasury and Inland Revenue.

The Panel was chaired by Sir Ivor Richardson from 2003 to 2008.