Reference no: EM132310433

Assignment : Taxation in New Zealand

Q.1 Kit is a permanent resident of New Zealand. He was born in Chile and retains his Chilean citizenship. Kit spends most of the year working off the coast of Indonesia on an oil rig for a United States company. He was recruited for this job in New Zealand and signed a contract with the company here. For the last four years, Kit's wife has lived in New Zealand with their two children. They purchased a home in New Zealand three years ago.

Kit and his wife have a joint bank account with Westpac Bank. Kit's salary is paid directly into this account. All of the family's other investments, including a share portfolio that generates dividend income, remain in Chile. Kit gets one month off from work every third month and, on these occasions, he meets with his family either in New Zealand or on holidays around South America (usually in Chile where his parents reside).

a) Assess the given scenario to decide whether Kit is a New Zealand resident for tax purposes. What are the factors you have considered to make a decision about Kit's residency status? List all those factors and justify your evaluation through quotes from relevant Income Tax Act 2007 sections or case laws.

b) Assume Kit is New Zealand resident for tax purposes; how Kit's salary and investment income would be taxed. Justify your answer through relevant ITA sections.

Q.2 Brian is a doctor employed by a hospital in Auckland. He is approached by a security company who offers to install a monitored security alarm on his property free of charge, in exchange for allowing the house to be used in a marketing campaign. The value of the alarm system is $2,000. The security company advises Brian that his house has been chosen as it is on a large corner site on a main street, which provides good exposure to passing traffic.

The agreement requires a sign to be erected on the outside fence of Brian's property. As part of the agreement, the house is also used in a television commercial which features Brian talking about the security system. Brian is paid $1,500 for participating in the commercial. Is either the value of the alarm or the $1,500 payment assessable income to Brian? You should provide justifications in support of your answer.

Q.3 The following table lists New Zealand's principal taxes. Please complete the table with related features for each of the taxes.

Tax	Tax base	Tax period	Tax rates	Taxpayer	Legislation
Income tax
FBT
GST
Customs duty
ACC

Q4 How is e-commerce challenging the tax system? Describe some potential issues, challenges and opportunities for future tax systems in general and particularly for New Zealand? Provide at least two recommendations, which should be justified by theoretical concepts or case law. (500 words max.)

Q.5 You have recently been appointed as the Minister of Tax and Revenue of the country called 'The Republic of NewLand'. NewLand, with a population of 750,000, has a thriving tourist industry and a range of natural resources, minerals, etc. Until now the majority of the Government's revenue has come from mining diamond and polishing NewLand's diamonds, for which there has been high worldwide demand. Unfortunately the diamond deposits are exhausted and the Government has concluded it is time (along with investing in manufacturing, tourism and other sectors) that it develops a tax system to fund its social and economic objectives.

One of your first tasks as the Minister is to design a tax system for the country. Initially you are requested to present to the Government the crucial factors that need to be considered in determining the nature of any such system. Your advice should take account of the principles of a "good" tax and taxation system. (500 words max.)