The Commissioner of Inland Revenue v. International Importing Ltd.

Judges:
Turner P
Richmond J
Macarthur J

Court:
Court of Appeal (New Zealand)

Judgment date: Judgment handed down 31 May 1972.

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Turner P.: The facts of this case will be found set out in detail in the joint judgment of Richmond and Macarthur JJ. which Richmond J. is about to deliver, and which I have had the opportunity of reading in advance. I will not traverse them here, and will introduce my judgment simply by stating that the question is whether, for the purposes of sec.129B of the Land and Income Tax Act 1954 the goods sold by a ``duty free shop'' operated by respondent company, to travellers departing overseas, and the subsequent carriage of those goods beyond New Zealand by the purchasers, constituted the ``export'' of those goods by the company, entitling it to the deduction given for income tax purposes by sec. 129B. There was no dispute between the parties as to the facts, which Richmond and Macarthur JJ. have summarised, and the question resolves itself into one of pure construction.

The approach enjoined upon Courts of construction by sec.5(j) of the Acts Interpretation Act 1924 is normally of little material assistance in the construction of revenue statutes. The ``object of the Act'' which the section designates as a key to questions of statutory construction is often only too clearly simply the collection of funds to swell the general revenues of the State; and Courts of construction have consistently declined to read implications into such statutes to catch a taxpayer, who in his business dealings has relied upon the text of the statute, by some extension of the wording accepting the notion of a moral duty to pay a ``proper'' amount of tax. The taxing provision is read as prescribing the tax for which its text plainly provides, no more and no less. But it is to be observed that in modern times a practice has developed of inserting in revenue statutes provisions

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whose primary purpose is not fiscal but economic. If it is desired by the Administration, for instance, to take steps to increase the foreign exchange reserves of the Reserve Bank, it may be thought expedient to this end to offer encouragement to persons and corporations to sell goods outside New Zealand in exchange for foreign currency, and this encouragement may take the form of an offer of some deduction for income tax purposes to those who engage in such transactions. This is what has happened in sec.129B of the Land and Income Tax Act 1954, the section in which we are in this case asked to construe and apply. Though inserted into a revenue statute, it is a provision whose purpose is obviously not fiscal at all. Exactly the same purpose might have been achieved by an Export Encouragement Act granting a direct monetary subsidy to persons who increase their exports, instead of allowing a deduction for income tax purposes, as was actually done. Section 129B is not a fiscal provision in the sense in which the cases on the construction of statutes use that term; and I think that it is not only permissible, but proper, in construing this particular section, to attempt to discern the purpose underlying the legislation, and then to give the section the ``fair, large, and liberal interpretation'' which will best bring about the result which the Legislature desired, viz. the encouragement of taxpayers to build up the foreign exchange reserves of the Reserve Bank by exporting more goods than they formerly exported.

It is proper to go even further. The administrative context in which sec. 129B came to be enacted cannot, I think, be overlooked. The section was enacted in 1962. Since 1938 it had been the law that no goods could be legally exported from this country without a licence issued by or on behalf of the Collector of Customs. This provision dates back to the Export Licences Regulations 1938/160 Reg. 3. These Regulations were still in force in 1962, when sec.129B of the Land and Income Tax Assessment Act 1954 was first enacted, and though since superseded by the Regulations of 1966 (1966/90) the new Regulations repeated the provisions substantially in the same words. The Regulations of 1938 were gazetted on the same day as the Import Control Regulations of the same year, and it is a commonplace of New Zealand economic history that the principal purpose of these sets of Regulations, and the result effectively achieved by them and collateral Regulations, was to regulate the outgo and inflow of foreign exchange, and to ensure that export and import transactions were so managed as properly to conserve the foreign exchange reserves of the country.

With all this as a relevant background it is now convenient to examine the text of sec.129B. Subsection 5 provides that the deduction therein specified shall be available to a taxpayer carrying on in New Zealand a business in which goods are sold, where there is an increase in export sales for any income year; the section goes on to specify the way in which the amount of that increase is to be calculated. ``Value of export sales'' is defined in subsection 1 as the amount of consideration received by the taxpayer in respect of ``export goods'' which have been sold. ``Export goods'' are defined as goods exported from New Zealand by the taxpayer, being goods (a) which were sold by him, and (b) of which he was owner at the time of disposal. It is not disputed that the last conditions were complied with in the present case, nor that the goods were exported from New Zealand. What was said by Mr. Mathieson for the Commissioner was simply that the goods were exported not by respondent company, but by the respective purchasers of them.

The section contains no definition of ``export'' nor can it be contended that this word is a term of art. It must therefore be given its ordinary meaning, or perhaps I should say one of its ordinary meanings, to be selected according to context. Clearly if it is given one of its ordinary meanings the travellers may be said to have ``exported'' the goods themselves, for they carried them (if small enough) on to the plane personally, keeping them in their possession while the plane flew out of New Zealand. And no different result follows in the case of the larger packages which were put into the plane's hold, of which the passenger-purchasers doubtless must be deemed to have had possession at the time when they

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were taken out of the country. But should the word ``export'' so be read, as referring to what these people did, if proper regard is had to the context in which that word is found in sec.129B, and if the acknowledged purpose of that section is remembered? The legislation is plainly addressed to those persons, and to those alone, who increase the foreign exchange reserves of New Zealand, by sending goods abroad, or causing them to be sent abroad, receiving in return foreign exchange for which they are bound to account, and do account, to the Reserve Bank. It is clear that even if the travellers may be regarded as themselves ``exporting'' the goods, the word ``export'' where used in the section must also clearly be applicable to those, such as respondent company, who send the goods abroad, or cause them to be sent, with this result. Surely a dairy company ``exports'' butter, and a fruit cannery ``exports'' its manufactures, whether it ships the goods to its own order in another country, or sells here f.o.b. to a foreign person or corporation, provided simply that the transaction is one in which it causes goods to be sent abroad in exchange for foreign currency which it receives and for which it accounts. For these reasons I have no doubt that whether the travellers are regarded as exporters or not, respondent company is qualified under the section to receive the allowance which it claims. It increased its transactions. The transactions were sales of goods of which respondent was the owner at the time of sale. The goods were taken out of the country as a direct result of the sale, and as one intended by both vendor and purchaser. And these were sales the immediate result of which was an increase in foreign currency reserves.

I cannot accept the tests suggested by Mr. Mathieson and Mr. Rabone, for appellant Commissioner, as appropriate for the resolution of the question whether respondent is to be regarded, for the purposes of sec.129B, as having ``exported'' the goods which it sold to the travellers. Mr. Mathieson submitted that it was not respondent, but the passengers, who exported the goods. As I have already acknowledged, so they did, if the word ``export'' is used in one of its ordinary senses - they took them physically across the frontier. But I do not think that the fact that the traveller exported the goods, using that word in a well-accepted sense, necessarily means, as a matter of logic, that respondent could not also be said to have exported them, using the word in another well-accepted sense. And I will add to this, that I am for myself inclined to the view that there cannot be - except perhaps in rare types of transaction - two successive exporters of the same goods for the purposes of sec.129B. My view is that, there being two accepted meanings of the word - (1) taking the goods out of the country, and (2) sending them or causing them to be sent out - the choice between them depends on the answer to the question: What operation is it that the section is obviously designed to subsidise? On this approach to the matter it seems clear to me that it is respondent's operation which is meant to receive the reward offered by the statute, and that Mr. Mathieson's argument must fail. And so must the interesting argument submitted by Mr. Rabone, as to the moment when property passed in the transactions under examination in this case. That inquiry, though an interesting one, seems to me completely irrelevant to the question which really has to be determined by the Court in this case.

For the reasons which I have endeavoured to give I am of opinion that the judgment given by Wilson J. in the Court below was right, and that this appeal should be dismissed.

This being the unanimous opinion of the Court, the appeal is dismissed accordingly, with costs $500 and disbursements.