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Banks Settle Long Running Tax Dispute -- Pay Taxpayer $2.2b

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Dec 23 NZPA - Four major banks tonight settled long-running disputes with the Inland Revenue Department (IRD), and will pay 80 percent of the amount in dispute, more than $2.2 billion.

Inland Revenue commisioner Robert Russell and the Solicitor-General David Collins QC, said they were pleased the tax disputes have been settled.

The BNZ, Westpac, ASB Bank, and ANZ National have agreed to settle by accepting liability for a combined sum that exceeds $2.2 billion, believed to be the largest commercial settlement in New Zealand history.

It followed IRD's success in the High Court this year in two cases involving a particular type of transaction known as "structured finance".

As late as this month Westpac, BNZ and ANZ National said they would go to the Supreme Court in a bid to hang on to about $8 million in unclaimed funds the IRD said belonged to the Crown.

Westpac Group confirmed tonight it was one of four banks including BNZ, ANZ and ASB to reach a settlement with Mr Russell.

It said it would now pay 80 percent of the amount the court deemed it owed, estimated by NZPA to be $760 million.

Westpac spun the payment as a positive, saying it would bring back to its books $190m, the 20 percent it no longer has to pay.

BNZ said it had already paid the $658m, 80 percent of its deemed liability.

The High Court and Court of Appeal both found against the banks in hearings over the past three years.

Westpac's agreement related to nine structured finance transactions undertaken by Westpac in NZ between 1998 and 2002. As part of the settlement arrangements no penalties will be levied against Westpac.

Westpac New Zealand chief executive George Frazis said, "We entered these transactions relying upon expert advice and a ruling issued by the IRD in relation to a similar transaction, but we accept the court has ruled and that, on balance, it is best that we accept this industry settlement and move on".

"Importantly, this has no impact on Westpac's service to our customers and the growing momentum in our New Zealand business."

All other details of the settlement agreement remain confidential, Westpac said.

BNZ said as a result of the settlement its court proceedings would be discontinued.

Under the settlement BNZ has paid IRD $658m, which represented 80 percent of the full amount of tax and interest.

Collectively, these payments fall within the provision of $661m raised by BNZ in August this year to reflect the High Court decision.

BNZ chief exceutive Andrew Thorburn said, "This is a complex and technical issue, and it has been the subject of much debate".

"Simply put; we acted in good faith at the time, the High Court has delivered a judgment, and now it is time to settle so that we can move on and move forward."

The settlement would have no impact on BNZ's ability to meet any debt and/or equity obligations, he said.

BNZ's overall capital position remained well in excess of Reserve Bank of New Zealand requirements.

The interest component of the settlement would be tax deductible and the balance of the provision not utilised will be included in statutory profit but excluded from cash earnings.

NZPA WGT kn

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