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Westpac Loses Appeal In Structured Finance Case

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Feb 20 NZPA - The Court of Appeal has dismissed an appeal by Westpac in a case between the bank and the Inland Revenue Department (IRD) involving structured finance transactions.

Westpac appealed a High Court decision to strike out a judicial review proceeding brought by Westpac challenging an assessment by IRD.

All the big banks have been involved in disputing tax assessments involving as much $1.7 billion of tax revenue for the tranactions known as "repos". The IRD argues the transactions are devoid of commercial purpose other than to avoid tax.

Former Finance Minister Michael Cullen closed the loophole involved structured finance transactions that he said was eroding the tax base.

Westpac had a binding ruling from IRD establishing the tax consequences and legality of one of the transactions.

The grounds for Westpac's judicial review centred on the inconsistency between the binding ruling and the assessment.

The Court of Appeal confirmed an existing rule that the correctness of a tax assessment must be challenged via proceedings under tax law and not by way of a judicial review, which is only used in exceptional circumstances.

Westpac's appeal turned on whether it could establish exceptional circumstances.

The Court of Appeal decided the circumstances were not exceptional and the High Court decision to strike out proceedings was upheld.

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