KEY POINTS:
Property developer Andrew Krukziener says an IRD claim that he owes $6 million in income tax is an attempt to set a landmark case to attack all taxpayers with family trusts.
Yet, the Government department mistakenly sent Krukziener a cheque for $1.2m as a refund to a joint venture project this year - money which he returned 10 days later.
Krukziener photocopied the massive IRD cheque as a memento of the embarrassing bureaucratic bungle.
In an exclusive interview, Krukziener told the Herald on Sunday the IRD began persecuting him as a result of unpaid GST on some penthouse sales in the Metropolis apartment tower he developed in Central Auckland.
Two major law and two accounting firms advised Krukziener to pay the bondholders as secured creditors, rather than paying the GST to the IRD, he said.
The tax bill totalled hundreds of thousands and since then, Krukziener has been embroiled in numerous stoushes with the IRD.
Most recently, the department claimed he owes $6m of tax in what would be a precedent-setting case.
The IRD case against Krukziener is that the loans he has received - and paid back - to his trusts were income and should be assessed as such.
Krukziener says what he has done is entirely legitimate and he has been victimised by the IRD. Krukziener says an IRD official admitted to him they want to use him to make a landmark case that would enable them to attack a number of other real estate developers and property investors who operate similar standard family trust structures.
Krukziener has spent hundreds of thousands each year in legal fees to keep fighting the IRD, winning all cases against them and this latest charge will be heard by the Taxation Review Authority early next year.
He also suspects the IRD was behind a failed Companies Office bid to have him barred from being a director in 2006.
Eleven companies that Krukziener was a director and shareholder in went into liquidation, triggering the investigation by the National Enforcement Unit.
The companies were connected to Krukziener's Metropolis tower development, which struck problems in 2000 when the property market took a dive.
To raise the $20m needed to repay a group of Taiwanese investors, Krukziener issued Metropolis property bonds to 1600 mum-and-dad investors.
Krukziener tried to refinance to pay the bondholders back on the due date but in May 2001 the bonds defaulted.
Responding to the IRD's actions, Krukziener's lawyer Murray Gilbert SC wrote that the IRD "responded vigorously" when GST was not paid on some property sales of the Metropolis.
Gilbert says the IRD even prosecuted Krukziener for failing to file a personal tax return on time, even though the return was filed before the hearing - and Krukziener was entitled to a $10,000 refund from the IRD.
Gilbert also alleged the IRD tipped off TV3 that Krukziener
would be at the Manukau District Court, where he was caught on camera, to cause "maximum embarrassment".
The Registrar of Companies later ruled there was no basis to ban Krukziener as a director, because the liquidation of the 11 companies was directly linked to the single failure of the Metropolis, not mismanagement. Krukziener had acted in "an exemplary manner," he said.
A spokeswoman said the IRD was prevented by legislation from making any public comment about individual taxpayers.
But she said the IRD took any complaints about service seriously.
"If someone believes Inland Revenue has not met a service standard, we'd like to know about it and have an opportunity to fix the problem."
jared.savage@heraldonsunday.co.nz
