BNZ has announced that it will appeal the New Zealand High Court's decision that would see it liable to pay the IRD as much as NZ$654 million in back taxes and interest. However, despite appealing the ruling, BNZ said it would make a provision of NZ$661 million for the tax case which would be reflected in the bank's June 2009 General Disclosure Statement. (Update 1 with provision, BNZ statement.) BNZ said that after taking the provision, the bank would still hold capital well in excess of Reserve Bank requirements and that it would have no impact on its ability to meet any debt or equity obligations. BNZ was the first bank to appear before the High Court in regard to structured finance transactions the banks undertook to reduce their tax bills between 1998 and 2005. BNZ, Westpac, ASB, ANZ and National Bank face a combined bill of over NZ$2 billion if they all lose their cases. Here is the release from BNZ:
BNZ Chief Executive Officer Andrew Thorburn today announced the bank will file an appeal against last month's High Court judgment on the Structured Finance Tax Case. Andrew Thorburn said: "This is a complex area of law, and given the facts of the case, we're not convinced that the decision was the right outcome." The case involved six structured finance transactions with offshore counterparties. The tax in dispute for these transactions is NZ$416 million. In addition, as at 30 June 2009, use of money interest of approximately NZ$238 million (net of tax) has been applied in the IRD assessment. The Inland Revenue Department has not yet provided any decision on potential penalties. In relation to the decision on the Structured Finance tax case, BNZ has decided to raise a provision of NZ$661 million (including associated costs), which will be reflected in the income statement reported in the June 2009 GDS (General Disclosure Statement). BNZ Chief Financial Officer Ken Christie said: "We believe we are taking an appropriate and conservative approach in reflecting the impact of the High Court decision in the BNZ financial accounts." "After taking this provision the bank will still hold capital well in excess of Reserve Bank of New Zealand requirements. And as stated previously, the provision will have no impact on BNZ's ability to meet any debt or equity obligations." "This includes our recent offerings through BNZ Income Securities Ltd and BNZ Income Securities 2 Ltd."
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