Supreme Court dashes fraud claims against IRD in $3.7b Trinity case

The Supreme Court has rejected a claim the Inland Revenue Department fraudulently won its $3.7 billion tax case involving the Trinity forestry scheme.

The court bench, comprising Chief Justice Sian Elias and Justices Andrew Tipping, John McGrath, William Young and Thomas Gault, upheld an appeal by the Commissioner of Inland Revenue and restored a High Court decision maintaining IRD's interpretation about tax deductions made by the scheme's investors.

The decision was delivered by Justice McGrath in Wellington today.

The tax department has previously said the investment scheme would have cost taxpayers up to $3.7 billion over its 50-year lifespan.

A group of Trinity investors, including the scheme's architect Garry Muir, claimed the IRD "deliberately refrained from putting material facts and law" before the High Court in the original proceeding, "so as to secure a judgment that department officers knew would not have been available if there had been full and frank disclosure of the legal position," the judgment says.

The group, led by Muir's Redcliffe Forestry Venture, said the commissioner "knowingly and wrongly applied a depreciation allowance to expenditure incurred by the Trinity investors" under a certain provision of the Income Tax Act.

The Supreme Court judges rejected the accusation, saying "Redcliffe cannot credibly claim that the litigation strategy attributed to the commissioner compromised its ability to mount an argument on the subpart's applicability".

Because Redcliffe challenged the legal correctness of a Supreme Court ruling, underpinned by the allegation of fraud, it erred in filing a new proceeding in the High Court, the judgment said.

"What Redcliffe alleges does not constitute a case capable of leading the High Court to set aside the 2004 judgment," it said.

Redcliffe and the other Trinity investors were ordered to pay $15,000 in costs with reasonable disbursements, and reversed a costs order in their favour in the Court of Appeal.

(BusinessDesk)

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12 Comments & Questions

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This case highlights a fundamental problem with tax legislation. That is that it is obviously now so complex that these arguments can go on for years. And the Commissioner can keep throwing massive resources at it. When does the Commissioner have the integrity to say to Parliament "please simplify our tax codes". That of itself will reduce costs and then we can focus on reducing tax.

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The fundamental decision is if it looks too good to be true, then it probably is. Looks like the only winners are the lawyers again!!

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Would a flat tax rate of 15% on total income for both business and personal solve the problem?

It sure would simplify matters and probably increase NZ Inc's overall tax take..

Then, no Corporate would have anywhere to hide? Problem solved?

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Not only would it solve the problem, it would set NZ on an economic growth path the rest of the world would envy.

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Tax is so complex with so many loop hole available to the rich which ends up increasing burden on the poor... Time for a clean slate with no holes, a simple tax that is unavoidable by companies would enable the govt to decrease PAYE tax

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doubt it will change while accountants make so much money farming the uncertainty

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The only thing this decision highlights is the fact that Gary Muir has been hell bent on delaying the effect of the Ben Nevis judgment and his own inevitable bankruptcy through bringing a hopeless proceeding that the Supreme Court has as good as held to be an abuse of process. At some point this nonsense has to end.

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Well more power to Muir. He is showing the IRD up, if you bother to read th judgments. His only crime is that he tried to use ridiculous, irrational and complex tax law, which he appears to understand, to his and his clients advantage.

But more importantly, anonymous, while they were pouring resources into scrapping with Mr Muir they weren't able to audit you.

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The answer is more simple - increase GST to 20% (save essentials) and reduce income tax to 0%. This will increase the tax take as tax will be impossible to avoid.

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#5 is the way to go. it would save a lot of costs, accountant etc and be fare to all, when you spend your money you pay the tax the more you spend the more tax you pay. The big spenders pay more tax this is very fare as no one pays PAYE.

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In the main, I agree. Also, a god send to biz owners, who would only have to bother with GST returns.

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I suspect his last recourse now is to appeal to the Jedi Council.

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