Just Where Can The Commissioner Look?
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In a decision delivered by the Supreme Court on Monday, major trading banks have been denied the ability to limit
discovery of documents held by the Commissioner of Inland Revenue. But the case is also important as regards the
man-in-the-street with its determination of what documents the Commissioner can use in order to challenge a taxpayer’s
claims for deductions.
The bank litigation relates to structured finance arrangements that have been challenged by the IRD as a sham, resulting
in amended assessments from the Revenue, involving a total of $1.7 billion. But its importance relates to any taxpayer,
whether corporate or individual.
The decision relates to tax secrecy laws and the extent to which the Revenue can restrict the Commissioner of Inland
Revenue in defending one action from using information held by the IRD relating to the business of other banks, where
documents held by those banks are relevant to the litigation. The Supreme Court held that the documents were relevant
for the purposes of the case.
The bank case involved “repo” deals undertaken by the BNZ during 1998 and 1999 and typically involving the purchase and
re-purchase of equity interests owned by an overseas counter-party over a five year period. The deals involved an
interest rate swap, a guarantee fee expense and borrowing costs.
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