IRD Settles $2.2 Billion Evasion Case with Banks
December 30, 2009 New Zealand Taxation
Five years of legal wrangling has ended in a NZD2.2 billion settlement reached between the New Zealand Inland Revenue Department (IRD) and the country’s four largest banks.
The multi-billion dollar agreement between the IRD and four Australian-owned banks, the Bank of New Zealand (BNZ), ANZ National (ANZ), Westpac and ASB Bank ,was announced in a settlement by Peter Dunne, New Zealand Minister of Revenue on December 23rd. The settlement, believed to be the largest in the country’s history, revolves around alleged tax evasion by the banks through a series of “structured financing” transactions.
Under the conditions of the settlement banks agreed to pay 80 percent of their disputed tax amount. Westpac will pay the highest amount among the banks at NZD865 million, BNZ will follow at NZD658 million. ANZ National and ASB will pay NZD400 million and NZD250 million, respectively. No penalties or interest charges will be levied by the IRD on the owed amounts.
Though the agreement has been heralded as a victory for the IRD and a beneficial compromise for the banks, taxation experts are dismayed with the settlement saying that a Supreme Court ruling would have given valuable clarification to the New Zealand taxation system. Thomas Pippos, Deloitte tax expert, commenting on the settlement, said, “There was hope that as cases were appealed it would provide greater clarity to the avoidance boundaries”.
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