IRD lawyer under fire for too much detail in tax case

The Inland Revenue Department's lawyer has come under fire from the judge in the High Court at Auckland for supplying too much information as the long-running tax case against former Securitibank boss John George Russell continues.

Mr Russell is appealing against a Taxation Review Authority decision by Judge Paul Barber last September that reinforced an IRD assessment of what he owes the taxman. That figure, covering 1985 to 2000, started as $15 million and has since swelled to $138m with penalties and interest.

At the heart of the dispute is whether Mr Russell made any money that should be taxed from complex tax avoidance schemes he set up after the Securitibank collapse in the mid-1970s.

He is said to have controlled two companies, Commercial Management Partnership and Commercial Management, which earned substantial consultancy fees from trading companies using the "Russell templates" to avoid paying tax.

The evidence presented to date includes 31 folders of key documents before the TRA while the IRD has amassed 289 folders of documents.

But IRD lawyer Mike Ruffin, when attempting to unravel the minutiae of the complex arrangements, was cut short during his second day of submissions before Justice Ed Wylie this week.

"At the moment there is a morass of details by the commissioner but I'm not sure it's going to shine much light on anything," Justice Wylie said. "The way this looks, [it is] the same structure as I understand it and has remained the same for 15 years. Do we need to drill right down to this detail?"

He said Mr Russell had reduced his answer to a core point – that he did not receive a single cent of the income assessed to him by the IRD and therefore is not liable. The commissioner for the IRD should similarly be capable of saying what the scope of the arrangement was, the judge said.

"I'm getting increasingly lost in the detail. I don't want to stop you developing your arguments. I've given you fair warning. I'm struggling to see where you're going."

Mr Ruffin said he was trying to illustrate the circuitous money route the Russell templates involved. "It shows he's got control and the cash is controlled for his benefit or benefit of the family trusts."

But Justice Wylie wanted evidence showing Mr Russell actually drew down funds from his trusts, rather than just moved a lot of money around the group.

Mr Ruffin told the court the two family trusts were treated in the same way as companies within the group.

The Commercial Management partnership run over 15 years involved six companies or agencies – all directed and controlled by Mr Russell.

The case is due to end next week.

- © Fairfax NZ News