WELLINGTON - Farmers embroiled in restructuring their Wool Board in the trough of a long-running slump in wool prices have been told to pay at least $2.6 million more in tax.
The Court of Appeal has ruled that the Inland Revenue Department (IRD) can reassess the Wool Board for tax after
hearing about a redeemable share deal in the so-called Winebox inquiry.
The Wool Board invested $100 million of reserves in shares in Capital Markets Finance in 1990. It said later it had considered the dividends tax exempt.
In 1995, after the deal was canvassed at Sir Ronald Davison's "Winebox" inquiry - and two days before the time limit for a reassessment expired - the IRD claimed tax was due on the dividends.
Redeemable preference shares were a key element in the "tax efficient" deals put together by European Pacific, a company owned then by Brierley Investments, Fay, Richwhite and the Bank of New Zealand. The deals were structured through the Cook Islands which issued certificates purporting to show that tax had been paid there.
Earlier this year, the Wool Board went to court challenging the IRD assessment of dividends on its Cook Island deal for the 1990 year. Justice Durie in the High Court ruled that Inland Revenue's "winebox mindset" affected its processes and that a reassessment of tax against the Wool Board was invalid.
The IRD appealed. Court of Appeal President Sir Ivor Richardson said it was not established that the IRD did not use honest judgment in the assessment.
The Winebox might have encouraged it to look at the case, but the IRD could not be criticised for that. Sir Ivor said even if the IRD were influenced by outside factors, it could still make a proper assessment.- NZPA
