Bank Of New Zealand Appeals NZD654m Tax Ruling

by Mary Swire, Tax-News.com, Hong Kong

13 August 2009

The Bank of New Zealand (BNZ) is to appeal against last month’s decision by the High Court in favor of a NZD654m (USD440m) tax assessment on the bank.

The case involves six structured finance transactions with offshore counterparties. The High Court decided that the transactions were without commercial rationale or benefit and were, in its opinion, entered into solely for the purpose of exploiting a tax benefit.

The tax assessment raised by the New Zealand Revenue Department amounts to NZD416m, in addition to which BNZ said that, as at June 30, 2009, it was liable to lose the use of money interest of NZD238m. At the time of the High Court decision, BNZ’s CEO, Andrew Thorburn, had said that it was the bank’s expectation that there would be an appeal.

It is reported that, despite the complexity of the case and its pending appeal, BNZ has already decided to make a provision of NZD661m, including associated costs, in its financial accounts as at June 30.

The other major banks in New Zealand – Westpac, ANZ, and CBA – are also said to face sizable assessments for similar structured transactions, against which they have made unspecified provisions.

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