BNZ loses massive tax case

Thursday 16th July 2009

The Bank of New Zealand has lost a landmark tax case and owes $654 million in back taxes and accumulated interest, in the first ruling from six similar cases against foreign-owned banks.

In all, there is around $2 billion in unpaid taxes and interest owing from banks.

The Inland Revenue Department has yet to calculate any additional costs, under the department's legendarily harsh penalty regime.

The decision is almost certain to be appealed.

"Clearly we are disappointed by the outcome," the BNZ's chief executive Andrew Thorburn said in a statement. The bank would review the 179 page decision and decide on an appeal within 20 working days.

"The judgement will have no impact on BNZ's ability to meet any debt and/or equity obligations (including related to NZ Income Securities and BNZ Income Securities)."

BNZ is owned by the National Australia Bank, trading in whose shares was halted on the ASX and NZX this morning pending the announcement of the outcome of the Wellington trial, which wrapped up a month ago.

The IRD case turned on challenging the BNZ's use of a binding ruling from the department on one transaction, which involved losses to the US tax base, to a similar "structured finance" arrangement involving losses to the New Zealand tax base.

Similar actions have been taken against Westpac, ANZ, National Bank (ANZ-owned), Rabobank and Commonwealth Bank of Australia-owned ASB. Deutsche Bank has already settled.

The win is a huge coup for the Crown Law Office and IRD, who are currently battling Westpac in the Auckland courts over similar transactions.

Businesswire.co.nz

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