Battle to bankrupt man with $485m IRD bill continues

John Russell owes the Inland Revenue Department nearly half a billion dollars. Photo / Jason Oxenham.

The battle to bankrupt an octogenarian Auckland businessman over a $470 million tax bill continues as he argues Inland Revenue should accept his repayment offer.

The IRD last year won a judgement for $367m against John George Russell and is attempting to bankrupt him while the debt bulges with interest and penalties.

Mr Russell, 80, offered to pay it off at $1000 a week for the rest of his life, but the IRD turned that down and wants to pursue insolvency and see if it can wring money out of assets Mr Russell may control.

The High Court declined his application to review the decision and that decision is today before the Court of Appeal in Wellington as Mr Russell again pushes his offer.

Mr Russell, who the court heard has dementia and is about to move into a retirement home, wasn't present.

His lawyer Simon Judd said if the IRD accepted Mr Russell's offer when it was made in December 2012, it would have clawed back about $130,000.

"Most ordinary taxpayers would consider paying $1000 per week - $52,000 per year out of tax-paid income - to be a very large amount of money. Nobody, I would submit, can suggest this is a frivolous proposal or a proposal that can be ignored out of hand."

In turning Mr Russell the IRD was ignoring its legal obligations to maximise returns for the taxpayer and use resources efficiently. It also relied on "irrelevant considerations", Mr Judd said.

He argued the High Court was wrong to look at Mr Russell's offer as "miniscule".

"It's not a small offer. The focus should be: can we get more money in a different way?"

Mr Judd said there was no evidence focusing on why he was fighting to avoid bankruptcy, prompting Justice John Wild to ponder if the IRD was right in thinking it would be better off in chasing insolvency.

IRD's lawyer Pauline Courtney summarised the reasons for that, including that the debt would continue to grow faster than Mr Russell could pay it, and his age.

Mr Russell would benefit from staving off bankruptcy for as long as he could and keeping control of his financial affairs, Mrs Courtney said.

"There's evidence of avenues [for repayment] that maybe available because of the structuring of Mr Russell's affairs through companies and trusts."

An example of this was property held in trusts and recorded at their cost price, not taking into account Auckland's property boom.

The IRD found Russell avoided paying tax on complicated "Russell template" transactions, reassessed his personal income and found he should have declared $15.8m between 1985 and 2000, instead of $298,700.

Justices Wild, Ellen French and Helen Winkelmann reserved their decision.