16 Mar 2009

BNZ begins court battle against tax demand

8:23 pm on 16 March 2009

The Inland Revenue Department has begun a battle to prove the Bank of New Zealand owes more than half a billion dollars in unpaid tax.

The trial, which started on Monday, is expected to last 10 weeks, with the IRD arguing the BNZ manipulated New Zealand rules to avoid paying tax between 1998 and 2005.

However, the BNZ claims its use of a tax plan that invested funds overseas was well within the rules.

The tax director of the Institute of Chartered Accountants, Craig Macalister, told Checkpoint the case is far from clear cut and he believes the trial result could go either way. He says the case will probably go all the way to the Supreme Court, so it may take years before a final judgment is made.

Justice Wild opened proceedings on Monday to a packed courtroom, remarking that he had never realised there was such a level of interest in tax law.

Two similar cases, involving Westpac and ANZ National, are also set to start. The banks have been sent amended tax bills.