18 May 2009

Crown defence begins in BNZ tax case

5:08 pm on 18 May 2009

The Crown has opened its defence at a multi-million dollar High Court case between the Bank of New Zealand and the Inland Revenue Department.

The case relates to the amount of tax the Bank of New Zealand owes on $500 million of transactions on foreign investments between 1998 and 2005.

BNZ has argued that its use of a tax plan in which funds were invested abroad was well within the rules.

However the department's lawyer said on Monday that the BNZ changed the way it invested overseas after the United States changed its regulations to reduce abuse of the foreign tax credits system.

The lawyer said the bank then claimed foreign tax credits which resulted in a loss to New Zealand's tax base and no ruling was sought from Inland Revenue about the legality of that change.