Huge tax case on way

A legal dispute involving a software investment scheme that's said to be New Zealand's second biggest case in the tax avoidance arena will probably not come to court until the second half of the year.

A legal dispute involving a software investment scheme that’s said to be New Zealand’s second biggest case in the tax avoidance arena will probably not come to court until the second half of the year.

The case will be tried in the High Court, as Inland Revenue wanted, but is not likely to come before the bench until August this year at the earliest, says Scott Anderson, the head of the company involved, Actonz Management.

Said to be larger in terms of the sums of money involved than the infamous “Winebox” scheme, it could set significant precedents in the tax and depreciation treatment of software and rights pertaining to software.

Actonz was battling to have the case heard before the Taxation Review Authority, a less public arena where the verdict, according to IRD’s litigation director Mike Leonard, would have less value in terms of legal precedent.

“We’re trying to get in earlier,” says Anderson, “but the IRD says dates should not be set until the document discovery process is completed.” IRD is in charge of that process and it seems to be proceeding quite slowly, he says.

The scheme involved 420 individuals of “high net worth” investing in a joint venture to market and further develop software, primarily for telephone billing.

Little cash changed hands for investors’ purchase of the right to the software.

The investors claimed a total of $226 million in depreciation on the software as an income tax deduction and further claimed $60 million GST rebate on the purchase.

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