BNZ IRD Court Case Finishes

July 21, 2009 New Zealand FinanceNew Zealand Taxation  No comments

The High Court has ruled that the BNZ bank must pay the Inland Revenue Department $416 million dollars back in taxes.

It was ruled by Justice Wild, from the High Court, that BNZ bank would have to repay any taxation benefits that they garnered from their involvement in “structured financing”. It was decided, in a 179 page verdict, that the structured financing was created solely for taxation benefit purposes and thus was regarded as tax evasion.

The “structured financing” set-up involved BNZ making equity investment in offshore entities. Conditions were set mandating that the entity repurchase the equity upon transaction close. This allowed BNZ to write off the cost of this transaction as a business expense. In total, six such transactions were made between 1998 and 2005.

In regards to the outcome, BNZ CEO Andrew Thorburn said “Clearly we are disappointed by the outcome. We will review
the judgement which spans 179 pages, and make a decision within twenty working days on
whether we will appeal. At this time it is our expectation that we will do so”, in a statement.

The issue still remains of the possible use of money fees associated with the payable amount, these amount to a total of $238 million. The Inland Revenue Department is yet to make a statement in regards to this.

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