The Commissioner of Inland Revenue has won an appeal over discovery of documents in a taxation case against Bank of New Zealand.
The IRD appealed a High Court decision forcing discovery of documents, arguing they were not relevant to the case. The case involves structured finance transactions that
the IRD argues were constructed to avoid tax.
The BNZ argued that four favourable rulings from the IRD on similar transactions were relevant and "conduct influencing".
They could help show inconsistencies in the IRD's approach.
The documents sought included binding rulings by the IRD, a second category of Westpac and National Bank documents and a third category of documents showing the commissioner's reasoning in respect of the BNZ transaction.
The High Court ruled that the Westpac and National Bank rulings were discoverable because they were relevant to the BNZ's defence.
And some of the documents were mass-produced by intermediaries and marketed to various banks. The High Court said it did not matter that the commissioner was not a party to some of the documents.
The effect of the High Court ruling was that the commissioner was obliged to discover documents that were similar to BNZ's financial arrangement.
The Court of Appeal said the analysis of the BNZ's transactions begins afresh in the High Court and the commissioner's view on earlier unrelated transaction does not assist in determining the purpose or effect of BNZ's transactions.
"We are satisfied that discovery is properly limited at this stage by the commissioner's concession that he will not call witnesses from inside the Revenue to give evidence on commerciality, acceptable practice, artificiality and contrivance".
If the commissioner's position shifts proceedings may warrant a discovery order of the kind sought by BNZ.
The Court of Appeal quashed the discovery order from the High Court. The respondents have to jointly pay costs to the appellant of $6000.
Finance Minister Michael Cullen four years ago closed the loophole involved structured finance transactions that he said was eroding the tax base.
- NZPA
