The Interpretation Provisions in the New Zealand Income Tax Act 1994

Historically, courts have been unwilling to adopt a purposive approach to the interpretation of tax statutes. In 1996, as part of a process of rewriting the Income Tax Act 1994, Parliament inserted a number of provisions into the Act that appeared to be calculated to require the courts to interpret the Act more purposively. They do not achieve this goal. In particular the newly added section AA 3(1) may in future be turned against the interests of the Crown to support otherwise unpersuasive arguments on behalf of taxpayers. Section AA 3(1) provides that the meaning of provisions in the Act is to be found by reading the words in context and in light of the purpose provisions. This is an attempt to instruct judges to interpret the Act in the light of its purpose, which is to collect income tax. However, reported cases show that “context” in this sense has different meanings depending on the relevant circumstances of the case in question, and meanings can vary from total historical context to merely the language of an adjacent part of the statute. While the former interpretation would assist the commissioner, the latter has traditionally found greater favour with judges and is more likely to be adopted, to the benefit of the taxpayer