IRD gets to keep $127.5M GST payment from forest sale

Nov. 28 (BusinessDesk) - The Supreme Court has upheld the Inland Revenue Department's bid to keep $127.5 million goods and services tax on the 2003 sale of 170,000 hectares of central North Island forestry.

The long-running tax dispute stemmed from KordaMentha's Michael Stiassny and Grant Graham, as receivers for Forestry Corp and Citic New Zealand, paying the tax bill in 2003 when selling the forestry assets of Central North Island Forest Partnership for US$621 million. Stiassny and Graham paid the bill amid concerns they may be held personally liable as CNIFP wasn't in receivership.

Bank of New Zealand and CNI Forest Nominees, as additional appellants, believed their charges over the sale gave them priority over the tax department.

Justices John McGrath, William Young, Robert Chambers, Thomas Gault and Peter Blanchard unanimously dismissed the appeal, saying while the receivers weren't personally liable for the charge, it wasn't recoverable because the tax department gave "good consideration" to the payment of GST, which was due and payable.

"More importantly, the claim fails because the Crown gave good consideration by accepting the payment in discharge of a debt which the partnership did owe," the judgment, delivered by Justice Blanchard, said. "There was no unjust enrichment of the Crown at the expense of the partnership."

BNZ and CNI's claim was overridden because the partnership owed the GST, trumping their priority as secured creditors.

The court awarded costs of $40,000 payable to the tax department.

CNI Forest Nominees parent Tenon said it was disappointed with the outcome, but the decision wouldn't have an impact on its existing tax position.

"There was only potential upside to Tenon in taking the action, and no downside to Tenon results from the court’s decision today," said Paul Gillard, Tenon general manager corporate.

(BusinessDesk)

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