Smiths City stumbles on $52 million tax windfall

Christchurch retailer Smiths City Group is in credit with the Inland Revenue Department after its accountant stumbled on a huge tax windfall dating back to 1991.

Smiths City said it would be paying "little or no tax" for some years after it struck a deal with the IRD, confirming tax deductions of up to $52 million.

The full implications are yet to emerge, but Smiths City said it would get a refund of between $2 million and $3 million for the 2003 to 2005 years, and "significant tax losses" were available going forward.

There was no tax impact for past dividends paid to shareholders and, more importantly, the agreement would result in the firm paying little or no tax for some years.

Chief executive Rick Hellings said the tax case was hugely complex and the company had continued to pay tax as normal in the meantime.

He said the board had not yet decided on what its future dividend policy would be, but the windfall gave it a better base for expansion.

It was definitely good news for shareholders.

The company had no idea it was entitled to the deductions until they were highlighted by its accountant, PricewaterhouseCoopers in Christchurch.

It adds up to a fairytale end for the company, which all but went to the wall in 1991. It slowly traded its way back to good health over more than a decade.

Smiths City has promised an update for shareholders as soon as it knows the final outcome.

- NZPA