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Giant Forestry Scheme Ruled To Be Tax Avoidance

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Posted 21 December 2004 - 09:38 AM

Giant forestry scheme ruled to be tax avoidance
21 December 2004
By ANNA JAQUIERY and BERNARD HICKEY

The High Court has ruled that investors in a multibillion-dollar forestry deal had deliberately avoided paying tax, marking a huge victory for the Inland Revenue Department in a case that dragged on for years and cost millions in legal fees.

The potential penalties threaten to ruin the wealthy investors involved, who in some cases had claimed $791 in tax losses for every $1 spent on the forestry scheme in Southland.

More than of 200 of New Zealand's wealthiest investors invested in the scheme set up by prominent Auckland firm of tax lawyers, convinced they could claim large tax benefits without having to invest much immediately, while at the same time contributing to Anglican charities.

Most of the investors settled out of court before the case was heard in August and September, but the architect of the scheme, tax lawyer Garry Muir, and his close associates battled on.

Inland Revenue alleged in the High Court that the Trinity forestry investment deal was New Zealand's biggest tax avoidance scheme with potential tax losses of up to $3.7 billion over 50 years.

The scheme used a novel approach to measuring the costs of a Douglas fir forest that meant investors claimed expenses in 1997 and 1998 that they were not expecting to pay till the trees matured in 2047.

The investors claimed about $140 million in tax deductions in those two years before Inland Revenue moved to shut the scheme down. The tax rule that was used by the scheme was changed by an act of Parliament with effect from the current 2004-05 tax year to stop the deductions.
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The 100 per cent penalties set to be imposed for the tax avoidance, plus interest, amount to tens of millions of dollars.

A 160-page judgment delivered yesterday by Justice Geoffrey Venning concluded that "the dominant purpose of the arrangement was tax avoidance".

Auckland-based lawyers Garry Muir and Clive Richard Bradbury, who created the Trinity investment deal, had fought for years to keep their identities secret, but the Supreme Court lifted name suppression last month.

Klaus Sorensen, a spokesman for Dr Muir, said on behalf of his client that the investors would appeal against yesterday's decision. He had no further comment.

The court was told that Dr Muir consulted Anglican clergy before creating the Trinity Foundation in 1997 to make donations to causes such as the Anglican City Mission and the Anglican Church Pension Board. The Anglican Church denied it was involved in the scheme.

Dr Muir and Mr Bradbury bought a 50-year licence to grow Douglas firs on land owned by Trinity Foundation companies, and agreed to pay a licence fee of $2 million a hectare, in 2047 when the trees were harvested. Investors depreciated the $2 million-a-hectare fee, a claim that was challenged by Inland Revenue.

The scheme also involved an insurance policy with a British Virgin Islands-based company, the cost of which was also claimed as an upfront deduction.

Inland Revenue applauded yesterday's ruling. "Today's judgment supports our view that this scheme constituted tax avoidance, which is very pleasing for the department and positive for the national revenue," director of litigation management Karen Whitiskie said.

If a High Court judgment stands, an award of costs against the Trinity investors who had not settled is likely to follow. If costs cannot be agreed between Inland Revenue and the investors, the judge will award costs.

http://www.stuff.co.nz/stuff/dominionpost/...23a6000,00.html
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#2 User is offline   ernie 

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Posted 21 December 2004 - 10:29 AM

Click here to download a full copy of this judgment (Accent Management Limited & Ors v Commissioner of Inland Revenue) - but only if you want some heavy legal reading over the summer hols - it is 116 pages - but a great insight into the games the rich boys play to avoid paying tax.

Meanwhile, some poor disabled person gets sent to prison for "defrauding" ACC of a few hundred dollars in home help payments.
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#3 User is offline   hukildaspida 

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Posted 07 April 2014 - 03:53 PM

Ten yeas on.

Wake up call for Forestry - New Zealand's most dangerous industry.
(Industrial Safety News March-April 2014 vol 9 No1)

http://www.emagcloud.../index.html#/1/
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#4 User is offline   hukildaspida 

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Posted 26 June 2014 - 02:30 PM

What background experience & qualifications do the likes of WorkSafe NZ staff that do these "Safety Inspections" have?

Have any of them worked at the coalface of the forestry industry?



Rogue forestry operators on notice

By Lydia Anderson
6:21 AM Thursday Jun 26, 2014 Add a comment

http://www.nzherald....jectid=11281991

Forestry operations in Wanganui and Manawatu have faced 17 health and safety enforcement actions in the past 10 months, according to WorkSafe New Zealand.

The industry is the country's most dangerous, with 28 fatalities since 2008.

WorkSafe issued 17 enforcement notices since August last year to local operators, which can include written warnings, improvement notices, infringement notices and prohibition notices.

Enforcement action can be taken for safety failing such as a written warning for tree-feller operating without an available radio for communications, or a prohibition notice for an unsafe digger.

The figures follow the release this month of the Independent Forestry Safety Review panel's public consultation document highlighting industry health and safety concerns.

Fielding-based Forest Owner Marketing Services co-director Marcus Musson said WorkSafe had taken a leading role in trying to make safety improvements to the forestry industry over the past 18 months.

"A lot of companies have had to step up to the mark and change their practices," he said.

"It has resulted in some people exiting the industry because they haven't been able to keep up with it, which is good."

However, he found some reporting on enforcement notices misleading because notices could be issued for low-level problems, such as an expired certification on a vehicle cab.

"Realistically it hasn't probably been as bad as what's been reported."

A lot of forestry companies were initiating mechanised processes for tree felling and breaking out, which was "making the job a lot safer but unfortunately you're still not going to be able to get away from the human component of it".

One challenge facing the industry was the lack of available trainers to teach new workers, and Mr Musson said he would have liked more government subsidies to fund more trainers.

Almost 300 WorkSafe NZ enforcement actions had been taken nationwide since last August, including 25 partial or full shutdowns due to "imminent danger of serious injury or death", Minister of Labour Simon Bridges said.

FIRST Union general secretary Robert Reid said a safety crisis had been unfolding in the forestry industry, with nearly 30 deaths and almost 1000 serious harm injuries in the last five years alone.


He was pleased the consultation document recognised that forestry health and safety problems were "driven by multiple factors and not just worker behaviours".

"For too long injured or deceased forestry workers have glibly been described as the 'architects of their own demise.'

"The document makes clear that the problems in this industry are driven by multiple factors and not just worker behaviours.

"The combination of inadequate wages and conditions for this extremely physical work is experienced by many workers as grinding fatigue, affecting both their mental and physical wellbeing."

The panel's discussion on worker participation and representation was critical, he said. Without a voice in the industry the crisis would persist and workers would continue to pay the price.

However, the Forestry Industry Contractors Association said the review lacked credibility.

Spokesman John Stulen told Radio New Zealand the panel had been unduly influenced by unions.

Most forestry operators were good, but WorkSafe NZ was under-resourced to catch "fly-by-night" farm forest operators, most of whom had never had an inspection, he said.

- WANGANUI CHRONICLE

By Lydia Anderson
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