High Court to rule on $500m tax debt plan

John Russell wants the High Court to approve his proposal to pay $1000 a week. Photo / Jason Oxenham

An 80-year-old accountant who owes Inland Revenue around $500 million wants the High Court to approve his proposal to pay $1000 a week off the debt.

If John George Russell's bid fails, it places him one step closer to bankruptcy, which the tax department appears intent on pursuing.

Russell, a former merchant banker who lives in Kawakawa Bay, is best known as the governing mind behind a template that the Court of Appeal called a "blatant tax-avoidance scheme".

According to that same court, the accountant established an "elaborate, maze-like structure of companies, partnerships and trusts" and provided advice on how others could avoid tax through their participation in the Russell template.

Only 1 per cent of the $500 million bill is core tax, the rest being penalties and compound interest.

In 2003 Russell was issued a $75 million bill when $15 million earned by companies between 1985 and 2000 was reassessed to him personally.

Almost a decade passed before Russell exhausted his challenges to this and the debt continued to accrue interest and penalties over that time.

Inland Revenue in April issued bankruptcy notices to Russell, who has previously proposed to pay $1000 a week back off the debt.

Although the tax department rejected the offers, the octogenarian yesterday applied for the High Court Court to approve the compromise.

His lawyer, Simon Judd, told Associate Judge Hannah Sargisson that Russell had no assets in his own name and that Inland Revenue wouldn't recover anything by bankrupting him. It was better for a creditor to get $1000 a week than nothing and Judd said there wasn't even a hint that Russell had concealed expensive assets.

IRD lawyer Pauline Courtney said the court could take more than just commercial considerations into account and argued "public interest" factors favoured bankruptcy.

Bankruptcy would remove Russell's ability to serve as a director of companies or as a tax agent, Courtney said.

She pointed to a recent Court of Appeal decision that said it was reasonable for Inland Revenue to reject the proposal because there remained a prospect that the Official Assignee unravelling Russell's "complex and opaque" affairs would produce a greater recovery of the debt.

The appropriate decision would be to decline the application over the compromise, Courtney submitted.

Associate Judge Sargisson reserved her decision.