John Drinnan

Media writer for the New Zealand Herald

Labour warns Govt on MediaWorks tax dispute

Labour MP David Cunliffe (centre) said it would be tempting for the government to get involved in the outcome of MediaWorks' dealings with Inland Revenue. Photo/ Dean Purcell.
Labour MP David Cunliffe (centre) said it would be tempting for the government to get involved in the outcome of MediaWorks' dealings with Inland Revenue. Photo/ Dean Purcell.

Labour will be watching the government "like a hawk" over MediaWorks tax dispute because of past treatment for the media company which owns TV3 and RadioLive.

Revenue spokesman David Cunliffe said Prime Minister John Key needs to guarantee there would be no political involvement in the outcome of MediaWorks' dealings with Inland Revenue.

A spokesman for the Prime Minister indicated there would be no involvement with MediaWorks' tax issues, and promised a more detailed response.

But Cunliffe was dismissive, pointing to past controversy which involved the government loaning MediaWorks $43 million that kept the company afloat during the global financial crisis.

The Government argued at the time in 2011 that the money was a deferred payment to help the radio industry during tough times in 2009 - not a loan.

"Do you really believe that in the case of this particular company ministers are going to be hands-off with negotiations with IRD?" Cunliffe said.

He also pointed to controversy over the government's dealings over Sky City and the convention which he said undermined the rule of law.

There has been no evidence of the government taking an interest so far apart from John Key saying he did not think the government would be overly affected by the Mediaworks receivership.

"But it is very tempting for the government given its track record and we'll be watching it like a hawk," he said.

The Court of Appeal has upheld MediaWorks' obligations to an estimated $22 million tax bill following a legal case in a tax avoidance lawsuit.

But leave is being sought for the underlying Alesco tax avoidance case being heard in the Supreme Court and the status of the company has complicated matters.

MediaWorks' receivers appointed this week said the tax dispute was unlikely to be carried over to new owners.

Under a complex deal lenders for the media company have written off $600 million and are expected to take over as equity holders of a new firm, with a potential $22 million tax bill at least partly abandoned.

Tax expert Mark Keating expected receivers and the Inland Revenue department would seek a negotiated settlement to pay a portion of the $22 million fee.

As for a negotiated settlement: "There is precedent for officials if the legal situation is in doubt - and they should clarify that - to negotiate an outcome which they believe is in the interests of the Crown," Cunliffe said.

"It would be inappropriate if the rest of taxpayers picked up a cheque for MediaWorks because there has been some complex commercial deal done."

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