IRD gets $2.2 billion from the banks

Wednesday 23rd December 2009

Four banks have settled their disputes with IRD over structured finance deals agreeing to pay a total of $2.2 billion.

The BNZ, Westpac, ASB Bank, and ANZ National have agreed to settle cases with Inland Revenue by accepting liability for a combined sum that exceeds $2.2 billion.

The settlements are at 80% of what was assessed by IRD and are believed to be the largest commercial settlement in New Zealand’s history.

The Commissioner of Inland Revenue, Robert Russell, and the Solicitor-General, David Collins QC, said they are pleased long-running tax disputes involving four major banks have been settled.

The settlement follows Inland Revenue’s success in the High Court this year in two cases involving a particular type of transaction known as ‘structured finance”.

Russell said it had been Inland Revenue’s long-held view that the transactions were tax avoidance.

Russell and Collins said the cases showed that Inland Revenue and Crown Law have the resources and capability to pursue very complex cross-border transactions.

BNZ said its settlement relates to six structured finance transactions entered into between 1998 and 2005.

Under the settlement it will pay Inland Revenue $658 million.

“This is a complex and technical issue, and it has been the subject of much debate. Simply put; 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 and move forward,” BNZ chief executive Andrew Thorburn said.

ASB chief executive Charles Pink said the bank has agreed to pay $264 million.

"ASB entered into the transactions on the basis of the best tax and legal advice available, and accepted banking practice at the time. However, in light of the High Court’s recent decisions in cases involving structured finance transactions of other banks, we have decided to conclude this matter by negotiation with the CIR.”

Meanwhile Westpac made a very similar statement to the other banks and said ”there will be a write back in 2010 of approximately $190 million.”

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