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A Walk on the Wild Side

Challenges to tax assessments usually challenge either the correctness of the assessment (carried on, almost entirely, through the Part IVA and Part VIIIA processes of the Tax Administration Act 1994) or the correctness or legitimacy of the process whereby the assessment is raised.

This article travels around the wilder shores of challenges to legitimacy of process, and examines the various arguments that have been put forward to challenge the legitimacy of the entire tax system.

An International Phenomenon

Challenges to the legitimacy of the tax system have been put forward in several jurisdictions.  In the United States such challenges appear sufficiently widespread to prompt the IRS to publish a detailed rebuttal of the common arguments in a 70+ page document [1] bluntly entitled “The Truth About Frivolous Tax Arguments”.

In New Zealand some organised activity appeared to have taken place in the late 1990s and early part of this decade.  Wild J mentioned this in Boyton v CIR (2002) 20 NZTC 17,615 (HC):

I understand that Mr Boyton is a member of a group called "The New Zealand Rights Litigators". The group has the general aim of preventing or ending taxation in New Zealand. That thought is as pleasant and inviting as it is unrealistic.

They’ve Got My Name Wrong

The first type of argument depends on oddly technical arguments, apparently seeking to divorce the person against whom the tax liability is asserted from the particular name or form of name used by the IRD.  For example, taxpayers can assert that their names are copyrighted and trademarked, and purport to deny the right to IRD to use their names.

The taxpayer in Boyton had failed to file tax returns and was prosecuted accordingly.  Appearing first in the District Court his arguments included the contention that certain legal documents were invalid because they incorrectly spelt his name (in terms of upper and lower case, hyphens and colons) and that his name had "sui juris status", by which he appeared to mean that his name was a separate legal entity from his person and, therefore, he was not personally required to comply with his tax obligations. These arguments were robustly dismissed by Judge Barber in the District Court as “silly nonsense”, a finding which Wild J did not disturb.

There’s A Loophole

The second type of argument put forward is that because of a flaw in New Zealand’s constitutional framework, the tax system lacks an adequate legal basis. 

One contender put forward[2] is Clause 4 of the Statute Concerning Tallage 25 Edw I which has been said to prohibit the enactment of legislation inconsistent with then subsisting rights and liberties.  However:

·         It appears doubtful is even part of New Zealand law (it does not appear in Schedule 1 of the Imperial Laws Application Act 1988),

·         In any event would be subject to the doctrine of implied repeal[3] if it did in fact forbid the enactment of any statute which changed Common Law freedoms and in particular the establishment, continuation or future modification of a system of taxation.

In Boyton the taxpayer argued that there is no definition of "income" in the ITA 1994, and, as a result, he did not know upon what he should pay income tax.  In common with many of the arguments raised in this type of case, the fatal flaw lies in considering the ITA as a wholly self-sufficient code.  In reality, as with every other aspect of law, the ITA is part of an inter-connected web and its meaning and application must be considered with reference to other laws, decided cases and the whole body of general human experience.  To say that because any particular word is not defined in an Act, the Act is therefore meaningless, is the sort of argument that gives extreme and arid legalism a bad name.

In the United States the argument appears to be that the Constitution forbids (or at leats does not expressly permit) a system of income taxation.  However, the sixteenth amendment to the Constitution does establish the legal right of the federal government to impose an income tax on all forms of income.

Apart from addressing individual arguments as they arise, there seem to be two fairly obvious responses to this type of contention:

·         First, if there were any serious doubt whatsoever about whether the existing laws conferred the power to tax, Parliament would inevitably enact remedial legislation, retrospective to whenever need be;

·         Second, if the purported concern goes wider than the effectiveness of the tax acts and extends to the legitimacy of Parliament and the entire machinery of State, then isn’t it a bit pointless seeking any redress in a Court which would suffer from the same lack of legitimacy?

It’s a Voluntary Contract, and I’m Not Contracting

A reasonably frequent argument (raised in Boyton and also more recently in Furlan v CIR (2007) 23 NZTC 21,012 (HC)) was that liability to tax was a consequence of a contractual relationship to which the particular taxpayer refused or had never consented to become a party.  In fact, of course, taxation is levied by Parliament by means of a statute and there is no sort of bilateral bargain with individual taxpayers.  Perhaps this argument has some origin or reflection in the Hobbesian notion of a social contract whereby citizens of a state leave a state of nature and combine under a system of government; but that contract was signed centuries ago and the only way one can withdraw from it (even if possible) is to withdraw entirely from all civilised society. 

An equally unsuccessful twist to this approach was employed by the taxpayer in Warburton v CIR (2007) 23 NZTC 21,373 HC who tendered a $1 coin as settlement of his tax liability as a defence to a bankruptcy petition brought by the CIR – presumably attempting to rely on contractual principles such as accord and satisfaction.

A less rigorous variant of this argument (yes, such a thing is possible) is “I don’t have to file an income tax return and pay taxes – it’s voluntary”.  While New Zealand’s tax jurisdiction embraces a principle of “voluntary compliance”, this simply means that the coercive powers of the State are there as a backstop not a first resort. 

I’m Not A Taxpayer

Mr Boyton also argued that the ITA taxes “persons”, and he was not a person. Wild J in the High Court observed:

Another argument Mr Boyton advanced is that he is not a "person" under the Income Tax Act because that word is defined as including a company, a local or public authority and an incorporated body of persons. Mr Boyton submits that it therefore excludes everything else, including him. This argument cannot succeed. The definition is an inclusory, not an exclusory, one.

He kindly added:

The distinction, whilst easily graspable by lawyers, is perhaps more difficult for lay people to understand.

In the United States the comparable argument appears to be that by purporting to reject United States citizenship in favour of state citizenship, federal income tax no longer applies.

My Religion or Race Excludes Me From Taxation

The final type of argument can be exemplified by Rupe v CIR (2004) 21 NZTC 18,519 (HC),where Venning J was faced with an appeal from a District Court judgment[4] on a debt collection action for recovery of unpaid taxes. Mr Rupe’s defences included his status as a Christian and the concept of Maori sovereignty as exempting him from taxes imposed by Parliament.  Venning J cited Hillyer J in Kaihau v IRD [1990] 3 NZLR 344 (HC):

"... it is abundantly clear that the New Zealand Parliament has the right to enact legislation applying to all persons in New Zealand, whether they had ancestors who lived here in 1840 or whether they have only recently arrived in New Zealand. The sovereignty of the New Zealand Parliament is clearly stated by Somers J in New Zealand Maori Council and Latimer v Attorney-General & Ors [1987] 5 NZLR 353, 398. There are exceptions exempting Maori authorities and Maoris from liability for income tax in certain circumstances which do not apply in this case, but apart from that there is in my view, no doubt that section 416 applies to the appellant as it does to everyone else in the country."

On the conscience issue, his Honour considered various biblical passages which bore upon the issue, preferring to apply the invocation “render therefore unto Caesar the things that are Caesar’s”, [5]but this may be seen as a diversion (if the Bible or any other religion’s teachings forbad tax, would that have been decisive?). More persuasive is the Judge’s following a decision of the European Commission of Human Rights[6] in an appeal brought by British Quakers who withheld from tax payments an proportion which matched the military budget compared with total government spending.  Referring to Article 9 of the UN Convention for the Protection of Human Rights and Fundamental Freedoms, the Commission stated:

"... the Convention does not always guarantee the right to behave in the public sphere in a way which is dictated by [religious] belief: for instance by refusing to pay certain taxes because part of the revenue so raised may be applied for military expenditure ... The obligation to pay taxes is a general one which has no specific conscientious implications in itself."

The taxpayer in Warburton v CIR (2007) 23 NZTC 21,373 also appealed to Maori sovereignty in his defence to a bankruptcy petition, saying he did not therefore recognise the jurisdiction of the Court.  Rupe v CIR was used as authority for rejecting this ground.


It is difficult to avoid a somewhat condescending tone when considering the arguments summarised.  Despite being so devoid of merit or logic as to make one wonder whether anyone could seriously believe their legitimacy, the arguments are repeatedly raised with apparent conviction. It may be that some are convinced by the arguments, despite what appears to those with a professional background to be their obvious hopelessness, and others simply run them as a form of protest against the system.

[2] Investigate! Magazine, June 2000

[3] See Laws NZ, Constitutional Law, para 76

[4] reported as CIR v Rupe (2003) 21 NZTC 18,129

[5] Luke 20:22 (New King James Version)

[6] Referred to in the judgment only as “on an appeal brought by Ms B Hibbs and Mrs M Birmingham from a decision of Surendran (Collector of Taxes) v Hibbs & Anor, (a decision of Sir John Donaldson MR, Neill, and Nourse LJJ, 4 June 1985)”