Bollard speaks on 'Trinity'

By IRENE CHAPPLE

The doctor couldn't be in the house - his job as Governor of the Reserve Bank prevented it.

Even so, Dr Alan Bollard managed to pipe up with an opinion as the Trinity tax case ground its way through week four of an expected 10-week hearing.

Bollard had been called by the Inland Revenue Department as it launched its case defending a challenge by taxpayers over their right to claim tax benefits on a forestry scheme.

The scheme - dubbed "Trinity" by the IRD - enabled investors to get immediate tax benefits on a forestry licence fee, of which the bulk was not payable for 50 years.

Part of the taxpayers' argument is that the commercial value of forests - taking into account variables such as inflation - will be greater than the licence fee when it is payable.

The taxpayers are arguing the investment made commercial sense even without the tax benefits.

The IRD argues the scheme was set up as a tax dodge.

A planned appearance this morning was canned after Bollard couldn't make it and instead the court was given a copy of his brief.

Bollard's statement said: "I am not aware of any serious attempt to forecast the rate of inflation in New Zealand over a 50-year period. I do not believe it is possible to do this by looking backwards due to major changes in the world economy and how it affects New Zealand, major changes in the way the New Zealand economy responds to shocks, major changes to the policies we have for dealing with inflation."

IRD deputy commissioner Robin Oliver told the court the department had become aware of several schemes since the mid-90s that had features including the transfer of property that was difficult to value with precision and a projected outcome well into the future that might not materialise.

Such arrangements prompted changes to the Income Tax Act, enacted for the 2004-2005 year, that prevented Trinity investors claiming a potential $3.7 billion in tax benefits.