Tax man studies big bank profits

By PAULA OLIVER

Finance Minister Dr Michael Cullen has revealed that the country's major banks are under Inland Revenue Department scrutiny for the amount of tax they pay.

His disclosure surprised many when he lifted the lid on the review in Parliament yesterday.

Asked about the success of state-owned Kiwibank, Dr Cullen said it was ahead of its forecast performance. He later referred to the large profits made by the major banks before making a barbed parting shot: "The Inland Revenue Department has been discussing with the banks the fact that their tax payments don't seem to reflect the amount of profit they've been making."

Act leader Richard Prebble seized on the comment as a breach of the confidentiality obligations that surround IRD's dealings.

Dr Cullen replied that he had not mentioned one specific bank, but "banks in general".

He later confirmed that IRD and Treasury were reviewing the tax laws applying to trading banks.

The work, under way for around a year, had included consultation with the industry and tax practitioners.

Dr Cullen said a report was expected "in the next few months", and he would consider then if legislative change was necessary.

A survey of New Zealand banks last year showed they continued to notch up record profits.

KPMG's annual banking survey found the sector's net profit after tax was up by a quarter at $2.56 billion, of which nearly $200 million was from one-off gains on the sale of assets.

Approached about Dr Cullen's remarks, the major banks said they took their tax obligations seriously.

ASB's head of institutional banking Peter Hall said the Finance Minister's comments seemed to be part of a set of questions about the tax payments of financial services and insurance companies since last year.

Mr Hall said ASB had been asked for "certain bits of information" by the IRD, and had co-operated.

Westpac stated in its latest general disclosure statement it was in regular contact with the IRD over an industry-wide audit.

It was confident the appropriate tax treatment had been applied.

BNZ spokesman Owen Gill said the bank understood there were ongoing discussions between the IRD and the Bankers' Association about two or three tax-related policy issues.

ANZ spokeswoman Cathy Wood said the bank took its tax responsibilities seriously.