Wellington, March 16 NZPA - High Court proceedings today involving Bank of New Zealand and the Inland Revenue Department (IRD) are part of a process that could eventually cost the big banks an estimated $2 billion in unpaid taxes and interest.

Seven banks, including all four of the big Australian-owned banks, BNZ, ANZ National, ASB Bank and Westpac, have been sent amended tax bills by Inland Revenue relating to some financial transactions before 2005.

The cases all revolve around the use of structured finance transactions, which allowed a foreign company to use a New Zealand subsidiary to invest in a third country and pay less than half the normal company tax rate, The Dominion Post reported today.

The banks have said they complied with the law and did not believe additional tax was due.

BNZ has received amended tax assessments from IRD for the 1998 to 2005 tax years totalling $416 million, plus interest of $225m as at the end of last year.

Penalties imposed by IRD could add considerably to the final cost.

BNZ said it had "independent legal opinions" confirming the transactions complied with tax law.

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