$732m deal not 'dodgy'

Transpower's $732 million lease-out-buy-back Cayman Islands finance deal did not deprive New Zealand of any tax revenue, Finance Minister Michael Cullen told Parliament yesterday.

"I am completely satisfied that there was no tax loss to New Zealand as a result of the structured finance deal," he said. "Indeed, there was a tax gain to New Zealand."

The 2002 deal by the State-owned national grid company with unidentified banks was similar to "structured finance" deals by Australian-owned banks ANZ National, ASB, BNZ and Westpac that allowed them to avoid $1.6 billion in New Zealand tax, and which the IRD is investigating.

It has been reported that under the deal, Transpower borrowed $732 million but then on-lent $532m to other financial institutions.

Dr Cullen yesterday denied the deal was "dodgy".

"The deal is perfectly legal in the jurisdiction in which it occurred. Indeed, for reasons that are well beyond me, that particular jurisdiction actually designs tax loopholes to be exploited by a variety of companies."

State-owned enterprises were allowed to enter into structured financial deals, subject to certain considerations.

"Final decisions are for the individual State-owned enterprise boards, subject to the usual consultation requirements," Dr Cullen said.

- NZPA