Westpac is considering whether to appeal against a High Court ruling that has ordered it to pay $961 million to Inland Revenue.
The Inland Revenue Department is seeking $2 billion in unpaid tax and interest from New Zealand's four main banks, arguing they used structured finance transactions between 1998 and 2002 to avoid paying tax.
Following a seven-week High Court trial in Auckland, Justice Harrison has ruled that Westpac used offshore transactions to avoid paying tax and must pay $961 million.
Inland Revenue says the decision supports its view that the transactions were tax avoidance.
Westpac was the second to have its case heard. The BNZ is fighting a High Court ruling that it avoided paying tax and owes $654 million.
A tax analyst at PricewaterhouseCoopers, Geoff Nightingale, says the cases have arisen because the law is not clear.
He says the Commissioner of Inland Revenue ruled in 2001 that an identical transaction was acceptable, but changed his mind in 2003.
Mr Nightingale says the rulings by different judges along similar lines must have an impact on other cases still to be heard.
Those cases are against the ASB, Rabobank and ANZ National.
ANZ National says it is reviewing its level of provisioning given the High Court decision against Westpac.
It says provisions may cut up to $A200 million, or 10 basis points, from its tier one capital ratio.
The verdict on Westpac has been welcomed by Revenue Minister Peter Dunne, who says he is pleased the interpretation by the Commissioner of Inland Revenue has been upheld by the courts so far, but noted there may be appeals.
