Inland Revenue cites international tax agreement as it refuses to hand over documents, but judge says she’s not persuaded that’s a good enough reason to enforce secrecy.
South Korean tax authorities are probing companies associated with New Zealand's KNC Construction, which once proposed building Auckland's tallest apartment tower.
The investigation is revealed in a High Court decision over a document wrangle between Inland Revenue and KNC's tax agent, Auckland accountants Chatfield & Co.
Local tax authorities, on behalf of their Korean counterparts, issued notices to Chatfield, requiring it to provide information about KNC and related companies.
Inland Revenue intends to pass that information on to Korean officials under a double tax agreement that has been in effect since the 1980s.
Chatfield sought a judicial review of Inland Revenue's decision to issue the notices.
As part of that application, the accountancy firm wanted access to documents exchanged between Korea and Inland Revenue, which would shed light on that decision.
Inland Revenue refused to provide these documents, saying they were not relevant and were about "matters of state".
It sought a High Court direction that the documents not be disclosed.
Senior Inland Revenue official John Nash said during a hearing in June that information exchanged under the double tax agreement was treated as secret.
In her decision, Justice Rebecca Ellis said she found the issue difficult.
While part of Chatfield's claim was "somewhat inchoate", she said the absence of specifics was partly because the firm had been unable to get access to the usual documents.
"Ordinarily a taxpayer (or his proxy) who is served with such a notice would be able to ask for the grounds upon which the notice was issued and to seek access to any material on any Inland Revenue file kept about him," she said.
While proceeding on the basis that the documents in question were relevant, Justice Ellis said it should first be ascertained whether Korea wanted to keep the documents under wraps.
SPI Property Fund director Murray Alcock have repaid all of the $600,000 of principal due to investors. Photo / Supplied
"If secrecy is sought and to be maintained, the matter will need to be referred back to me and the balancing of the identified interests will need to occur ...
"I am unattracted by the proposition that simply because the request is made pursuant to a [double tax agreement], the request and associated documents must be confidential," she said.
The tower proposal was for a 67-level building in Elliott St, downtown Auckland, but a Chinese developer has since bought the site and plans to build there.
Nothing to see
KNC Construction's Ben Lee told Business Insider there was no issue over tax in New Zealand, nor would the Korean investigation affect any projects here.
The company courted controversy last year after its former chairman, Huh Jae-ho, returned to Korea to face a multi-million dollar tax bill.
Lee said the majority of this had been paid and discussions were in progress with the Korean tax office about the rest of it.
"It's just a holding matter on the Korean side," Lee said.
KNC's website says the company has several residential and commercial projects "on the drawing board".
Next round...
The former business partner of Alex van Heeren has confirmed he will push for the Huka Lodge owner to have his financial affairs examined before a High Court judge.
If van Heeren is forced to come to court, it will be his first time in the witness box during his 19-year fight with South African Michael Kidd.
Kidd claimed he got less than US$5 million when the pair severed ties in 1991, while van Heeren allegedly held on to assets worth at least US$47.5 million - including Huka Lodge, Dolphin Island retreat in Fiji and 32kg of gold.
The application to have van Heeren examined could be argued as early as next Friday, when a hearing about costs is also scheduled.
Better late than never
SPI Property Fund directors Allister Knight and Murray Alcock have repaid all of the $600,000 of principal due to investors, albeit two months late.
The men, who in April were each fined $25,312 for failing to file audited financial statements, last year said they would repay investors $1.08 million of interest and principal.
They agreed to court-enforceable undertakings with the Financial Markets Authority that they would pay back $600,000 of this amount by June 30 this year.
About half of it was still owed at that date and the FMA extended the payment deadline three times. But the pair have since made good, and the FMA said on Monday that the full $600,000 had come in.
