Eric Watson and the Cullen Group Case
6 Pages Posted: 18 Apr 2019
Date Written: April 1, 2019
According to the Commissioner of Inland Revenue, the aim of the tax avoidance scheme in Cullen Group Ltd v Commissioner of Inland Revenue  NZHC 404 was to reduce the taxpayer company’s liability to tax by $51.5 million. She assessed it to tax on that basis; and Palmer J, in the High Court at Auckland, upheld the assessment. The Commissioner is to be congratulated on her victory, and one hesitates to criticise a litigation strategy that has proved successful. The aim of this brief article, however, is to suggest that the aim of the scheme was actually to reduce the taxpayer’s liability to tax not by $51.5 million but by about $103 million; and that she should have assessed it to tax on that basis. It is perhaps too late for the Commissioner to advance in this case the argument that leads to this conclusion; but the issue is worth addressing because it has arisen in other cases in the past, it will almost certainly arise again in the future, and there is every reason to suppose that significant public revenues are consequently at risk.
Keywords: Tax avoidance, General Anti-Avoidance Rule, New Zealand, Eric Watson, Cullen Group, power of reconstruction
JEL Classification: K34, K40, K42
Suggested Citation: Suggested Citation