The high stakes tax showdown between Eric Watson's Cullen Group and Inland Revenue has entered the home stretch.

Both sides presented closing statements to the High Court this week, drawing to a close a hearing over the past three weeks that canvassed the probity of tax havens, the definition of "associated persons", and whether Watson's use of the low-cost Approved Issuer Levy amounted to the exploitation of a tax loophole.

Justice Matthew Palmer is expected to reserve his decision, but the stakes of the case makes an escalation to superior courts likely.

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Watson's Cullen Group is challenging assessments by Inland Revenue that a complicated series of related-party loans using Cayman Islands vehicles in 2002 amounted to tax avoidance, requiring the payment of back taxes - and interest - totalling $112 million.

The transactions in questions saw Watson sell all the shares in Cullen Investments - the personally-owned vehicle controlling the majority of his wealth - to Cullen Group. This purchase was funded with $291m in related-party vendor finance with the loans assigned to Cayman Island companies Modena Holdings and Mayfair Equities.

David Cooper, acting for Cullen, said the transaction was intended to remove Watson from New Zealand tax residence - a legitimate and reasonable thing for a high-worth individual to do, he said - as he emigrated to London.

Cooper conceded Watson had links with all entities involved in the transactions, but said of the Cayman Islands companies Modena Holdings and Mayfair Equities he had only an "economic influence" through the terms of loans.

"There was neither shareholder nor governance control in the usual sense," he said.

Cooper said it was agreed that under the Approved Issuer Levy - which attracted only a 2 per cent fee on interest paid rather than the 15 per cent Non-Resident Withholding Tax sought by the Commissioner - the parties involved in the transaction were not "associated persons" and its entitlement to the levy was therefore legitimate.

Cooper said attempts by Inland Revenue to claim the opposite were "seeking to rewrite the legislation rather than to interpret in a purposive manner."

Cooper said repeated criticism by his opposite of the Cayman Island connection - described often with the "tax haven" prefix - was unjustified.

"The Commissioner's repeated use of the phrase 'tax haven' appears designed to create an emotional rather than a reasoned response and seeks to taint [Cullen] and the transaction through the repeated use of a pejorative term," he said.

"It reads as a jury point and adds nothing but rhetoric."

Gillian Coumbe QC, acting for Inland Revenue, said in her closing statement the transaction was an "engineered facade to suggest corporate distance and the appearance of genuine offshore lending".

Coumbes said despite the bewildering range of vehicles - she counted 16 individual trusts had come up during the course of the case - the key player, Watson, was in control at all times.

"Mr Watson's overriding de facto control (albeit masked by the pretence of complicated transactions and intermediaries) that is at the heart of the tax avoidance here," she said.

"Whether one draws the transactions in a straight line or a circle, one starts and ends with Mr Watson."

She noted the arrangement had an added benefit to Watson and the Cullen grouping of allowing the related-party interest - charged at 16 per cent - to count as deductions against income to further reduce tax, with $108m used in such a way by March 2009.

Cooper, in remarks to the court, disputed this calculation and said the net "tax gain" of the transaction was only $4.9m.