French bank latest to fall to IRD tax avoidance net
By Paul McBeth and Pattrick Smellie
Aug. 7 (BusinessDesk) - The New Zealand arm of the French bank, BNP Paribas, is the latest international bank to fall
foul of the New Zealand tax department's campaign against the use of cross-border convertible notes, quietly agreeing to
pay back tax of $18.435 million in an out of court settlement reached on March 21, according to Companies Office
filings.
The disclosure of the settlement, after balance date in the accounts for the financial year to Dec. 31, is the first
time Paribas has been linked to the use of either Optional or Mandatory Convertible Notes - OCNs and MCNs - which tax
planners used to try and reduce tax liability in New Zealand by a swag of foreign corporations, most of them in
Australia.
The notes allowed debt and equity to be structured across borders in the most tax-efficient way, but only if tax
authorities did not deem them to be avoidance.
A test case involving Perth-based Alesco, which the New Zealand Court of Appeal decided in the Inland Revenue
Department's favour in March last year, has created a flood of settlements with taxpayers using similar structures to
avoid tax in New Zealand.
Notes to the accounts for BNPP (NZ) Ltd say the IRD issued notices for unpaid tax in March 2009 relating to the 2003,
2004 and 2005 tax years on OCNs issued in 2001 and 2002, for unpaid tax of $8.778 million. That assessment was
challenged in the High Court in April 2009, but in March this year, the company "agreed to pay the IRD 11,547,995 euros
(NZ$18,435,246) in settlement of the issued notice of assessment denying interest deductions for Optional Convertible
Notes issued by the company in 2001 and 2002."
That allowed the reversal of assessments for $4.389 million in penalties, $1.357 million in late interest payments and
$259,250 in core tax in 2013.
Among those caught in the IRD operation against the use of MCN's and OCN's were Telstra Corp, Toll Holdings, and former
Mediaworks owners Ironbridge Capital.
(BusinessDesk)