Hamish Fletcher

Hamish Fletcher is a business reporter for the NZ Herald

Next move in $367 million tax case

Judgment goes in favour of the Inland Revenue. /file pic
Judgment goes in favour of the Inland Revenue. /file pic

A 79-year-old accountant being chased for a $367 million tax debt is now going to court in a bid to stall the IRD from bringing bankruptcy proceedings against him.

The IRD won a summary judgment against John George Russell this week for $367m.

The Auckland accountant has filed for a judicial review of Inland Revenue's refusal of a proposal he pay $1000-a-week for the rest of his life against his tax debt.

Russell -- who developed a template that the Court of Appeal called a "blatant tax-avoidance scheme" -- first tabled this proposal in 2006 and a number of times since, but it was rejected by the IRD.

He is now seeking interim relief from the High Court preventing the IRD from taking any more enforcement action against him, pending the outcome of the judicial review bid.

This includes bankruptcy proceedings, which Russell's lawyer told the High Court last month was the purpose of the IRD's action against his client.

The application for interim relief is due to be heard in August, and no date has yet been set for the wider judicial review bid.

The judicial review process was one argument advanced by Russell's lawyer, Simon Judd, on why summary judgment should not be entered.

But in awarding summary judgment to the IRD this week, Associate Judge Jeremy Doogue said it would not create any difficulty for the judicial review bid.

Even so, Associate Judge Doogue said Russell's prospect of success in the judicial review proceeding was "not great".

"To summarise, I do not consider that the plaintiff should be delayed in obtaining judgment because of the last minute judicial review proceedings when there has been more than adequate opportunity for the defendant to seek substantive relief by way of judicial review at any time during recent years," the judge said.

Between the late 1970s and 2000, Russell established what the Court of Appeal has said was an "elaborate, maze-like structure of companies, partnerships and trusts", and provided advice on how others could avoid tax through their participation in the Russell template.

The IRD argued that through the use of a partnership, Russell avoided paying tax on income earned through Russell template transactions.

It reassessed Russell's personal income and said he should have declared income of $15.76m between 1985 and 2000 instead of $298,700.

This assessment was upheld by the High Court in 2010 and Russell failed to overturn it when he took the case to the Court of Appeal in 2012.

Russell's original tax bill was around $5m, but penalties and compound interest over 25 years inflated it to $138m at the time of his High Court case, and in excess of $177m when he went to the Court of Appeal.

- NZ Herald

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