NZ's big 4 banks to pay back huge tax
Source: Agencies |
December 25, 2009, Friday
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Print Edition
Print Edition
NEW Zealand's four biggest banks will pay NZ$2.2 billion (US$1.5 billion) to settle the largest tax avoidance case in the country's history.
Revenue Minister Peter Dunne said yesterday the government was getting only 80 percent of the total owed by the banks, but welcomed the settlement as the end of a complicated five-year legal battle on behalf of taxpayers.
"In that sense you have got to be very happy," Dunne said.
The four Australian-owned banks, Westpac, Commonwealth Bank's ASB, National Australia Bank's BNZ, and ANZ Bank, carried out a series of so-called "structured finance transactions" between 1998 and 2005 that were challenged by tax officials.
In the transactions, each bank raised funds it lent to a company - often using the cash to buy equity in the foreign-based company to the value of the loan - on the proviso the company sold it back to the bank at a specified price at a specified time.
The transactions were considered by the banks to comply with the tax laws at the time, but New Zealand's Inland Revenue Department argued the loans were an attempt to avoid tax.
In two court cases, judges found the only purpose for the deals was to cut the banks' liability to pay tax on their other income.
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