$2.2B catch for IRD

[donna]

Four big banks have admitted defeat in a long-running battle with the tax department and admitted liability for more than $2.2 billion in unpaid tax.

Said to be NZ's largest commercial settlement and a good result for NZ taxpayers - everyone has to meet their tax obligations...

read more


Cheers,

Donna

[CJ]

From what I have read they paid 80% plus interest. No penalties were paid which if they lost in the courts could have been doubled the liability (100% for avoidance).

This is a good result for the IRD (they could have lost in the the supreme court - the probably would have lost if the Privy council was still around).

but

it is a bad result for taxpayers (large corporates anyway).

The banks entered into these transactions, in some cases with the blessing of the IRD (binding rulings). If it went to court when they orginally entered into the transactions, the banks would have won (there has been a shift in the way the courts rule). This removes certainty to corporates - what else have they done which was OK but is no longer deemed to be so - Look for lots of MCN and OCN cases in the new year.

This will force corporates to be conservative in their tax planning. This could be a good thing for the IRD or it could force large corporates to remove money from the country (is it a loss if they weren't paying tax anyway).

[CJ]

Inland Revenue argued the transactions used a foreign investment provision in the Tax Act in a way not intended by Parliament.
...
"We acted in good faith at the time, the High Court has delivered a judgment, and now it is time to settle so that we can move on," BNZ chief executive Andrew Thorburn said.

Stuff

A couple of interesting quotes. Now interpreting the black letter law is not enough, you have to understand what parliament, who probably didn't know exactly what they were voting in, thought it was meant to be. Bad drafting is now ok because the black letter law can be ignored!!!

[AMR]

Definitely a loss if the aussie banks sell their NZ operations and lessen competition.

[Perry]

I agree with CJ and said as much, here.

When NZ statute becomes a plaything of a government
department with a vested interest, it's akin to lifting the
lid from Pandora's Box. And it's not just corporates which
are at risk from such fickle capriciousness. It may start
there, but is also likely to 'trickle down' to lower Courts
dealing with minor matters. The TT & DT are examples,
as is the Family Court.

Reliance on the principle and intent and such fair, large
and liberal interpretation as shall give appropriate meaning
and effect to the preamble of an Act is OK, but only up
to a point.

A citizen should be able to rely on the law and what it
says to give certainty in selecting any particular course
of action. When that doesn't happen, despotism may
well be not far away.

[Viking]

Oh c'mon. Drunken drivers have been using the letter of the Law to exonerate themselves but that doesn't make them right.
Same for these banks. They were always tax avoidance, were structured that way and they deserve to be pinged.
No difference to the issue of transfer payments between operating companies where one is charged less than the real cost to transfer the wealth from one country to another and that case was fought out years ago. Why the banks thought their commodity was different only they know.
The experts that advised them duped the dumb twits at the bank who thought they could get away with making a killing for their bonus. Do the words bonus and bank ring any bells?

[Perry]

What then is your response to this statement?

The banks entered into these transactions, in some
cases with the blessing of the IRD (binding rulings).

Or
. . . When is a binding ruling not a binding ruling?

Like Full & Final Treaty Settlements, perhaps?

[CJ]

. . When is a binding ruling not a binding ruling?

The IRD did not challenge the transaction with the binding ruling - they couldn't. However, the banks replicated or slightly modified the transactions. It is these transactions which the IRD challenged.

Binding rulings only apply to the specific arrangement named within. Anything else, if not identical is fair game.

[spaceman]

What I'd like to know....

....is


Does the 80% payment set a precedent????

Can I now pay only 80% of any amount the IRD claims it is owed by me?????

Cheers
Spaceman

[roseneath_rat]

Spaceman, I know your comment was intended to be tongue in cheek, but if the bill is big enough then it is certainly up for negotiation. I have had clients who have negotiated discounts for "up front" cash payments for back taxes & penalties.

[donna]

Yeah it was a win all round - the banks share prices rose after the deal, and the IRD get $2.2B.

Cheers,

Donna

[Perry]

And the W'gton woodenheads get to con all their
constituents about good the books are looking and
how they've really done well, in that quarter.

Yeah, right.