Taxman closes in on accountants $485m debt

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

IRD serves bankruptcy notice over accountant’s long-standing debt after latest bid to stop proceedings fails.

Inland Revenue now has a clear path to try to bankrupt an accountant who owes it nearly half a billion dollars.

Only $5.7 million of this amount is John George Russell's original tax bill, and the rest is penalties and interest that have compounded over the years. That bill continues to rise, and at the end of March was $485 million.

The former head of a merchant bank, Russell has been battling the IRD for decades and developed 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.

Despite winning a $367 million judgment against Russell last year, the IRD was blocked from trying to bankrupt him over the debt in September. That was because the octogenarian sought a judicial review of the IRD refusing payment proposals from him, including that he pay $1000-a week back until his death or mental incapacity. However, that judicial review bid was thrown out of the High Court last month, with Justice Raynor Asher saying this would "save unnecessary cost and delay."

"The attempt to re-litigate yet again issues that have been finally determined after Mr Russell has exhausted all his rights of challenge, the delay in bringing the proceeding and the lack of merit in all the claims, shows the application to be an abuse of procedure," Justice Asher said.

The IRD served Russell with a bankruptcy notice around a week later, despite him appealing Justice Asher's decision.

Although he tried to get the Court of Appeal to stop the IRD from launching bankruptcy proceedings, this was rejected on Friday. The court said it was of the view that Russell's appeal, which will be argued in June, had a "weak prospect of success".

Russell said it wouldn't be the end of the line for him if the appeal fails.

"It's a ridiculous situation. They [the IRD] are spending money trying to bankrupt me so they get nothing and I'm spending money trying to not be bankrupted so I can pay them."

The IRD wants to pursue bankruptcy action against Russell in the hope the Official Assignee can see what assets he has access to.