Air NZ faces $240m tax bill for HK deals

PUBLISHED : Tuesday, 23 March, 2004, 12:00am
UPDATED : Tuesday, 23 March, 2004, 12:00am

The Inland Revenue Department has slapped a HK$240 million tax bill on Air New Zealand for transactions conducted through a locally registered shelf company.

The carrier issued a statement to the New Zealand stock exchange yesterday, saying that the tax department had assessed back taxes against its Hong Kong subsidiary, New Zealand International Airlines, covering the 13 years from 1989.

It also said it would appeal the tax demand.

'Air New Zealand's taxation and legal advisers have indicated that there are grounds upon which the assessments can be challenged and Air New Zealand will file objections,' the airline said.

'There is no dispute over the facts or the manner in which Air New Zealand has filed its tax returns; the issue is around the appropriate application of Hong Kong tax laws.'

The company said it expected that any tax ultimately due would be less than the figure indicated by the revised tax assessments, adding that the amount could be paid from cash reserves.

However, Air New Zealand said the bill could reach HK$550 million if the 2003 and 2004 tax years were also reassessed.

An aviation analyst said he doubted whether the tax demand would do much harm to Air New Zealand, which has undergone operational restructuring in the past two years.

'I don't think this will derail them. It appears Air New Zealand was using a Hong Kong-based shell company to buy all their aircraft,' he said.

'[The reassessment] may have something to do with the asset acquisitions and how they accounted for them.

'But they are back on their feet again, the government has recapitalised them and they've been showing recurring profits.'

The New Zealand government injected NZ$885 million (HK$4.55 billion) into the airline three years ago when it faced commercial collapse after its Australian subsidiary, Ansett Airlines, went bankrupt.