BURDENS OF TAXATION

Otago Daily Times, Issue 18535, 21 April 1922, Page 7

BURDENS OF TAXATION

NEW ZEALAND SHIPPING COMPANY LOSE THEIR APPEAL CASE. AN IMPORTANT DECISION. IFHOM OCR OwK C'OBRESPONDEJfT.) . . .LONDON, February .23. A question which has been seriously , exoroising the directors of shipping companies for a number of years was brought to a conclusion, for the time being at any rate, by r g Z en \ voeJ f in House of' Lords. The New Zealand Shipping Company, were the appellants in the caLj, but the judgment was of vital interest to pfacticaUy all large shipping firms. The quwtion i 6the i a J or^\S n company incorporated abroad and therefore so far as its constitution and place of residence as a corporation are concerned, resident in the country pf its incorporation, is taxable in the Un cf d r ngdo! ? 1 ’ nofc onl y in respect of the profits from trade conducted and managed by K-:^ 1 °f Directors in the United Kingdom, but also in respect of the profits derived in the country of its incorporation from business conducted and managed by a separate Board of Directors Income-tax in New Zealand is assessable whether it is derived from New Zealand or elsewhere, except that income not derived from New Zealand is entitled to exemption if it is derived from some other country within the British dominions and is chargeable with income-tax in that country. ino General Commissioners for the City of London assessed the company on their whole trade including the trade in Australasia, finding that the trade was one trade carried on and exercised at the London office, and that the whole of the operations “ * h ® Dmted Kingdom and elsewhere were subject to control and direction of the head office m London, where the board bad general control of the finances of tlio company, the issue of shares, the ascertainment of profits, and the control of dividends. Mr Justice Rowlett and the Court of Appeal affirmed the assessment and the case was taken to the House of Lords, where IVsr Charles Henry Thew Suror Taxes, was the respondent ’ Sir John Simon, K.C., contended for the appellants that the Now Zealand Shipninir Company (Limited), being a foreign corporation, can only carry on trade within the United Kingdom within the scope of the powers conferred on it by the laws of New Zealand, and that the London Board is precluded by the articles of association from conducting or managing trade in Australasia the conduct and management of which are by the articles especially allotted to the New Zealand Board, and that the company does not and cannot be deemed to reside in the United Kingdom within the meaning of section 2 of the Income Tax Act, 1852, so far as relates to the possession of property in New Zealand or the trade carried on in Australasia by the New Zealand Board. Counsel further submitted that the order of die Court of Appeal should be reversed and that judgment should be given that the determination of the Special Commisioners was erroneous in point of law end that the case be remitted to them to determine how much of the assessment on the appellants was .in respect of the profits of trade conducted by the New Zealand Board of .'eotors in Australasia and how much was in respect of the profits of trade conducted and managed b- the London Board in the United Kingdom. Without calling on counsel for the Surveyor of Taxes, their Lordships dismissed the appeal. Lord Buckmaster *said the appeal afforded another illustration, if illustration were needed, of the, heavy burdens that had to be carried by industrial enterprises whose business lay both on this and on the other side of the sea. It had been long held that in order to determine whether a company were resident in one place or another the registered office of the company was only an incident in the evidence necessary for such determination. They had to find out the chief seat, of management, and in this cape he thought the General Commissioners were right in finding that the chief seat of management, and the centre of trading lay hero, and that, it, was in this country where the real business was actually carried on. That finding was also consistent with the articles of association. Lords Atkinson, Sumner, Wrenbury, and Carson concurred, and tho appeal was dismissed, with costs. Tins will be a serious disappointment to the many firms who are -placed in a similar position to that of the New Zealand Shipping Company. Any relief from this heavy burden must now come through the Chancellor of the Exchequer on the representations of the Colonial Secretary.