Uncertainty is possibly the most unwanted and disruptive influence on business today. Whether it's uncertainty around the political, regulatory, social or tax environment, the impact can be enormous.
The recent attempt by the Actors Equity to impose its view of the world on the producers of the Hobbit movie is an excellent case at point.
Such was the level of uncertainty this caused in the minds of the decision makers at Warner Bros that New Zealand very nearly lost the hosting rights for the most expensive movie(s) ever to be made.
Without question this would have had a long term impact on our economy of some billions of dollars at a time we could least afford it, and it was of no surprise government made every effort to retain the production in New Zealand.
Uncertainty in the tax environment can be equally as destructive to investment in New Zealand as the actors union's actions were to the Hobbit. In a world where countries must compete for scarce capital the tax system and how it is administered can greatly influence the outcome of where investment is ultimately made.
Where uncertainty exists investors will avoid investing or, alternatively, place such a risk premium on their capital that it is unaffordable to New Zealand businesses. Both outcomes are unsatisfactory to New Zealander's and should be avoided at all costs.
The enthusiasm of Inland Revenue to apply the tax anti-avoidance provisions against taxpayers in recent times is an area that is causing significant uncertainty for the business community and potential investors.
The special attention currently being given to some wholly owned multi-national companies, traditionally large providers of capital to New Zealand, is also of concern and is causing the consistency and fairness of our tax system to be questioned.
The need for clarity on what is truly considered tax avoidance has never been greater and without it our ability to attract the significant investment we need for infrastructure, innovation and business expansion will be limited.
The next series of tax avoidance cases being taken by the Commissioner has received an unusual amount of publicity in recent times. These involve what are referred to as optional convertible notes or OCN's. And while an uninformed reader of financial publications may well get the impression these are of a similar magnitude and type to the recently settled banking conduit cases, they are vastly different.
The OCN cases being disputed all involve companies obtaining funding from foreign parent companies for significant New Zealand investment, be it acquisition, expansion or repaying debt that had previously been used for this purpose. OCN's were considered an attractive form of funding by these companies for both tax and commercial reasons.
Further there was a binding public ruling, or more precisely a binding accrual determination, the Commissioner had previously issued that codified how the tax law must be applied to OCN funding instruments.
Ironically, in order to get absolute certainty as to their New Zealand tax position, the taxpayers concerned ensured the legal terms of the OCN funding were entirely consistent with the Commissioner's ruling.
Some years later the Commissioner notified these companies of his view that following his ruling was tax avoidance and he would be looking to adjust their taxable income.
Almost at the same time, and with the affect of causing these already frustrated taxpayers to question the consistency of our tax system, the Commissioner issued a new binding ruling on OCN funding which was identical to the one these multi nationals were relying on, with the one exception that it could not be applied by wholly owned group companies.
The uncertainty and frustration this action has caused, not only these affected multinationals but the business community in general, should not be underestimated. Seeking to tax two identical transactions differently solely on the basis that one is with a wholly owned entity and the other is not is indeed a concerning approach. Its wider implications are significant and clarity is required.
If not settled beforehand, these cases will ultimately be decided by our Courts - hopefully in a manner that will provide guidance on whether following the Commissioner's own binding determinations can be tax avoidance (remembering that not following them would be breaking the law) and importantly also whether it is correct that there can be one law for wholly owned groups of companies and one, more tax friendly, law for everyone else.
There is of course a further series of tax avoidance cases before the courts at present which are also causing uncertainty.
In these cases the Commissioner is seeking to challenge a number of taxpayers that have used limited liability companies to contract through and conduct business.
This has long been a preferred commercial model for operating many small businesses in New Zealand and one which until recently has rarely been challenged. The flow on implications these cases are significant not only for the affected taxpayers but also for the tax landscape in New Zealand .
It would seem that unless taxpayers structure their affairs to ensure the maximum possible amount of tax is paid there is a risk the Commissioner may look to apply the tax avoidance provisions. This was never what Parliament intended.
To conclude, there is no doubt that in ensuring the shooting of the Hobbit was retained in New Zealand Sir Peter Jackson and the government have contributed hugely to the slow but steady recovery of our economy.
The Commissioner too has a significant role to play in this recovery - he must ensure uncertainty in our tax system is removed wherever possible and that Investors perceive our tax system as fair and consistent. This includes how the tax anti-avoidance provisions are applied.
Without this we will be unable to attract or retain the significant investment we need.
Disclosure: Tony Joyce is a tax partner at KPMG. KPMG has previously provided advice to some clients on optional convertible notes.