Westpac to appeal tax avoidance ruling

Tuesday 3rd November 2009

Westpac New Zealand will appeal last month's billion dollar judgement against it in the High Court, which found that four representative structured finance transactions between 1998 and 2005 constituted tax avoidance.

"In our view, there are sound arguments that warrant an appeal of the High Court's decision," said Westpac NZ chief executive George Frazis of the ruling on transactions which allowed foreign-owned banks operating in New Zealand effectively to choose their own rate of tax to pay.

The case is unlikely to be heard any earlier than the last quarter of next year.

Such are the sums involved that appeals to the Supreme Court are also likely, irrespective of how the Court of Appeal rules, meaning that the status of more than $2.2 billion of unpaid back taxes is likely to remain in limbo for some years yet. The total sum involved does not include penalties which the IRD is able to apply as it sees fit.

Earlier this year the Bank of New Zealand, owned by National Australia Bank, lost its challenge against the findings of the Commissioner of Inland Revenue on back taxes and interest owing of $654 million.

In recent days, another applicant against the IRD - ANZ National Bank - added a further $240 million to provisioning already in place to cover unpaid back taxes and interest of $562 million involved in its claim against the IRD.

The two remaining banks with exposure to court actions are ASB, which is owned by Commonwealth Bank of Australia and is contesting claims worth $280 million, and Rabobank of Holland. Deutsche Bank settled with the IRD on similar transactions some time ago.

Businesswire.co.nz

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