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Vector disputes tax bill after $53 million Transpower deal

Energy company Vector is fighting the IRD over a tax bill from a $53 million deal with Transpower. 

Lawyers for both parties appeared in the High Court at Auckland this morning before Justice John Faire.

Vector’s lawyer Lindsay McKay says more than $53 million that was paid by Transpower to Vector for an electrical engineering project is not taxable.

Vector had granted Transpower access rights to its tunnel and its land, some of which Vector owned and some of which it had property rights over, so Transpower could build a subterranean cable network. 

Mr McKay told the court Transpower, which operates the national power grid, wanted to upgrade the network between its substations in Penrose and Albany.

To do this, it made an agreement whereby a $50 million payment was made for use of the tunnel, and more than $3 million was paid for access to other land Vector either owned or had property rights over. 

Mr McKay says that the payments are not taxable because they are capital payments and cannot be classed as revenue.

He says for the payment to fall under the Income Tax Act's provision CC1, as the IRD contends, the deal must have included a licence, not just the giving of an "access right".

He asked Justice Faire to take a strict literal interpretation of the law, saying it was "most unsafe" to depart from the letter of the law in this area.

The lawyer indicated that the provision of tax law relating to land was not well traversed in New Zealand law so analogies in closing will be drawn from other, general cases. 

The IRD, which is being represented by Pauline Courtney, says the payments are taxable. 

The hearing is expected to take three days with expert evidence from both sides.  

vyoung@nbr.co.nz

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Comments and questions
2

To clarify
Is Vector saying it is a capital receipt ( non taxable) and Transpower saying it is tax deductible expenditure??
If not why the court case?????
Cant have it both ways these days

They is no symmetry required in tax. The treatment for the two parties can be different.