Taxation

Running head: TAX 1
Taxation
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TAX 2
Part A
In New Zealand, a company is said to be a resident for the country at the point that it is
‘incorporated’ under the law of New Zealand. Also, those companies that get their incorporation
from outside the country are said to be residents for New Zealand in case their management is
done in the country (Oslen, 2019).
According to section CB3 of the Income tax Act of 2007, making profits in a given
scheme or any other activity, the income that is earned by an individual who carries on his own
activities for the purpose of gaining profits is termed as a ‘personal income’. In New Zealand,
resident companies pay their taxes basing on the worldwide income they obtain (Mueller, 2016).
The tax rate charged to these companies is constant and it is at 28 percent. Basing on Adam
Smith’s principle of equity, a company or an individual should pay tax proportion to their
income or profits gained but for the case of New Zealand, all resident companies are equally
charged and this is in contradiction with this canon (Mueller, 2016).
Also, rule CB4 of the act states that for any personal asset gained due to disposal, revenue
is gained by an individual because of selling off his personal property is entitled to him given he
acquired the asset with the aim of disposing it off. The buying of assets is brought up by the
‘base cost’ of those assets that are being sold at the price they were purchased for the purpose of
tax depreciation (Oslen, 2019). This may bring about a rise in the assets’ cost base. However, for
any addition assets, the seller is likely to be paying more tax. In New Zealand, the past tax
liabilities are meant to remain with the company and are not to be shifted together with assets.
This is because the buyer may legally succeed practices that are faulty or even compliance

TAX 3
processes. In this case, the buyer may have interest in making taxes due with an intention of
identifying and solving such risks and weaknesses (Oslen, 2019).
In addition, CB5 of the income tax Act states that the revenue that an individual earns
from ‘disposing off’ the individual property income in case the entire business is to sale in that
very type of property. In New Zealand, there is a tax known as the ‘value added tax’ which can
also be termed as ‘Goods and Services tax’ (Oslen, 2019). Now, the rate is at 15 percent and this
should be attached to all the sellers of products and services under the companies that are
registered with Goods and Services Tax. The sale of main business products to the buyer by any
registered company goes hand in hand with supplying of goods for the purpose of Goods and
Services Tax minus the presence of any rule and the goods are charged at the standard rate.
However, the business is rated with zero by the supplier in case it is a ‘going concern’
(Lamensch, 2012).
Part B
The tax working group provided several measures to protect the a steady fast adherence
of the tax system through improving the administration responsible for taxes that is thought to be
established minus considering increase in the amount of tax on additional income received from
capital gains. This could be done through the following; strengthening the enforcement of
resident companies since there seems to be problems with the calculation issue within the affairs
of taxation. Also, the fall of Revenues on the ‘hidden economy’ may be enforced through
creating strict requirements of reporting.
In addition, the group emphasized on the establishment of a single agency for the
government that is responsible for collecting debts. This could increase on New Zealand’s