Watson’s holding company facing IRD demands

Sometimes IRD does go after the rich.

NZH: Tax man chases Eric Watson’s firm for $60m

Eric Watson’s holding company is facing demands to pay $60 million in back taxes after Inland Revenue decided its complex network of related-party loans and Cayman Island vehicles amounted to tax avoidance.

The high-profile expatriate businessman… faces the prospect of the tax bill indirectly taking a chunk of his estimated $450m fortune.

The tax claims, which have worked their way through the High Court at Auckland over the past two years, are set down for a full airing at a three-week trial starting on August 27.

Watson is not being personally chased, with IRD making its claims against his holding vehicle Cullen Group. Justice Mark Woolford noted in a pre-trial ruling that “before the arrangement at issue, Mr Eric Watson personally held all the ordinary shares”.

The tax claim is being contested, with Watson’s Cullen Group arguing its actions were not only legal, but intended to be legal by Parliament when the relevant tax legislation was passed.

Not surprising that it’s contested.

The restructuring saw a complex chain of loans and share transfers between entities – with Watson making $291m in loans to Cullen Group to enable the sale of his Cullen Investments shares, then assigning these loans to two Cayman Island companies – that Inland Revenue alleges served no purpose except to avoid paying $59.5m in tax.

“The Commissioner alleges that this was a tax avoidance arrangement,” Justice Woolford summarised in his ruling.

Justice Woolford said Inland Revenue claimed the manoeuvre was “not a genuinely arms-length transaction” but was instead “contrived” and “carefully designed” to ensure the interest payments involved qualified to pay only a 2 per cent levy instead of 15 per cent non-resident withholding tax.

Watson recently sold the NZ Warriors league franchise, reported to be in the region of $18m.

 

16 Comments

  1. Blazer

     /  May 12, 2018

    this is another form/substance case.It is clearly tax evasion imo…a la winebox construct.The intent is undeniable.

    • Kitty Catkin

       /  May 12, 2018

      Are you an expert in this field ? How do you know this ?

      Tax havens are not illegal; the fact that everyone knows where they are should show this.

      • Blazer

         /  May 12, 2018

        not sure you are aware what imo means…IN MY OPINION…I hope you adhere to your own advice and only comment on matters that you consider yourself an expert’..on!

        • Kitty Catkin

           /  May 12, 2018

          Most people say IMHO. imo isn’t at all obvious, it looks like a typo.

          • Gezza

             /  May 13, 2018

            No I’m with Blazer on this (and I might add, in all humility, that I feel that I’m often not wrong). I prefer to say imo (in my opinion) in lower case too. Because when people say IMHO,

            imo,

            IT DOESN’T LOOK VERY BLOODY HUMBLE – does it ? >:D

            • Kitty Catkin

               /  May 13, 2018

              No, it doesn’t and isn’t, but most people do use caps for these initialisms to make it obvious that that’s what they are; LOL and the rest, especially in the middle of a sentence,

            • Kitty Catkin

               /  May 13, 2018

              If Blazer had used a comma, it would have made a difference to the clarity of the sentence.

            • Gezza

               /  May 13, 2018

              Madam, asking Blazer to use proper punctuation would be as much use as requesting an eel to fly.

  2. Blazer

     /  May 12, 2018

    most people are hamsters in the wheel with no original ideas at all.Anyway I broke my rule about replying to you ,didn’t check the poster I.D properly.Back to the …norm.

    • Kitty Catkin

       /  May 13, 2018

      I take it that you include yourself in that category,

  3. PartisanZ

     /  May 12, 2018

    The taxman cometh …

    Why, oh why has it taken so long …?

    • Gerrit

       /  May 12, 2018

      Because everyone is entitled to due process…unless you are in favour of firing squads and anarchy.

      • Gezza

         /  May 13, 2018

        Not keen on anarchy, peronsally, but I must admit the firing squad sometimes seems to have a thing or two to recommend it. 😕