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NZ Banks Settle Tax Dispute Over Structured Finance Transactions

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

30 December 2009


The Australia and New Zealand Banking Group (ANZ), Westpac Banking Corporation (Westpac), the Bank of New Zealand (BNZ) and ASB Bank have reached a final settlement with New Zealand’s Commissioner of Inland Revenue (IR), in an industry-wide settlement of tax assessments.

The tax assessments related to certain structured finance transactions undertaken in the late 1990s and early 2000s by each of the banks, or their subsidiaries, that reduced their New Zealand tax liability.

A ruling of the High Court in October against Westpac had judged that the structured finance transactions were "tax avoidance arrangements entered into for a purpose of avoiding tax”, and it was known that each of the banks was looking at their respective positions in light of that judgment.

“The settlement announced … between the IR and four major banks in a long-standing court dispute was a victory for legal process,” Revenue Minister Peter Dunne announced.

The government revealed that BNZ, Westpac, ASB Bank, and ANZ have agreed to settle the cases by accepting liability for a combined sum that exceeds NZD2.2bn (USD1.5bn).

"This agreement brings to an end five years of a complicated legal battle. It is good news that all parties can now move forward," Dunne continued.

He explained the IR had strongly pursued what it saw to be a clear-cut case of tax avoidance, and its diligence on behalf of the taxpaying public had been rewarded.

As part of the settlement, it has been agreed that all relevant legal proceedings will be discontinued. The banks have pointed out that they had made sufficient and full provision against the outcome of the assessment case, and that the settlement will therefore have no negative effect on their 2010 accounts.


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