High Court Rules Against Bank Of New Zealand In Record Tax Case

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

23 July 2009

The High Court of New Zealand has ruled against an appeal by Bank of New Zealand against a tax assessment for NZD654m in respect of structured finance transactions.

Said the bank:

'As previously disclosed, the New Zealand Inland Revenue Department (IRD) is carrying out a review of certain structured finance transactions undertaken by some New Zealand banks. As part of this, BNZ received amended tax assessments for the 1998 to 2005 years which BNZ challenged in the New Zealand High Court.'

'The High Court judgment released today in relation to the Structured Finance Tax Case found against BNZ. The case involved six structured finance transactions with offshore counterparties. The tax in dispute for all transactions is $416 million. In addition, as at 30 June 2009, BNZ is liable to use of money interest of $238 million (net of tax). The possible application of penalties has yet to be considered by the IRD.

'It’s important to clarify that the judgment will have no impact on BNZ’s ability to meet any debt and / or equity obligations (including those related to BNZ Income Securities Ltd and BNZ Income Securities 2 Ltd). BNZ has a capital base well in excess of Reserve Bank of New Zealand capital ratio requirements.'

BNZ CEO Andrew Thorburn said: “Clearly we are disappointed by the outcome. We will review the judgment which spans 179 pages, and make a decision within twenty working days on whether we will appeal. At this time it is our expectation that we will do so.”

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