The dispute between seven of New Zealand's largest banks and the country's Inland Revenue has started in earnest, as the Bank of New Zealand (BNZ) meets the Inland Revenue in the High Court.
The hearing commenced on March 16 at Wellington's High Court, and is expected to last up to 10 weeks.
Seven of the country's largest banking corporations are involved, four of which are Australian-owned, and include the Bank of New Zealand (BNZ) and ANZ National. The Inland Revenue alleges that they are guilty of ignoring revised tax bills relating to a set of financial transactions carried out in the years 1998 through 2005.
According to the Inland Revenue, the banks used a structured finance loophole that allowed them to significantly reduce their tax liability.
Despite accusations that it owes the Inland Revenue over half a billion dollars, BNZ has defended its position, arguing that it was unaware such a system of capital investment was against the law.
If it wins this test case, the Inland Revenue will demand a collective back-payment of around NZD2bn (USD1.05bn) from the banks.
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