12 Dec 2011

IRD wins landmark tax case

7:04 pm on 12 December 2011

Inland Revenue has won a landmark tax avoidance case that will influence 16 similar cases disputing $226 million in tax.

The High Court in Auckland has ordered the Australian-based kitchenware supplier Alesco to pay $8.6m in tax and penalties.

Alesco is one of 16 companies that used optional convertible notes in its New Zealand subsidiaries in the early 2000s, a cross-border way to convert debt to equity and minimise tax.

But Inland Revenue says they were interest-free loans.

Ernst & Young's tax partner, Jo Doolan, says other companies facing the same situation have cause for concern.