Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

UPDATE: Mercury faces $2 mln charge after losing tax dispute

UPDATE: Mercury faces $2 mln charge after losing tax dispute

(Updates to show Mercury's extra tax charge in 1st, 4th & 5th paragraphs; corrects headline; updates share price in last paragraph.)

By Victoria Young

July 8 (BusinessDesk) - Inland Revenue has won a tax case against Mercury NZ over the tax classification of two of its turbine halls, which will add an extra $2 million to the electricity generator-retailer's tax bill.

Mercury had brought the case against the IRD as it disputed the tax department's classification of the turbine halls for its Kawerau and Nga Awa Purua geothermal power stations as buildings instead of plant.

IRD had said the turbines were buildings and therefore subject to a depreciation rate of zero percent, while the power company said that they were part of the plant and therefore the 9.6 percent rate should apply.

Mercury's most recent annual report had noted the litigation could have a tax cost of $6 million, in lost depreciation over the lifetime of the assets.

Justice Anne Hinton's judgment records the financial implications of the different tax approaches as "considerable", as the depreciation claimable by Mercury for 2012-2015 would be about $7.4 million. That includes the additional $2 million tax cost over the period covered in the dispute.

Mercury's lawyer, Lindsay McKay, had argued that while at first blush the turbine halls may look like buildings, they were really part of the plant.

The judge said her approach would be to look at the ordinary and natural meaning of the word building and noted the IRD had already defined it after depreciation rate changes were made in the 2010 budget.

"This is not one of those relatively rare cases where a structure is part of the apparatus for carrying on a business, or so integral to the production process itself that it should be properly classified as 'plant'," the July 1 decision says.

The case was heard in the High Court at Auckland in June.

Mercury shares rose 1.3 percent to $4.64, and have climbed 34 percent so far this year.

(BusinessDesk)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Consumer NZ Testing: Nine Sunscreen Brands Fail Protection Tests

Nine different brands fell short in the latest round of testing by Consumer NZ, which covered 20 products. More>>

ALSO:

Media: NZME 'In Discussions' To Buy Stuff

NZME confirms that it is in discussions with Stuff’s owners Nine and has put a proposal to the Government regarding a possible transaction. However, NZME notes that these discussions are preliminary... More>>

Consultation: Plan Of Action To Protect Seabirds

The draft National Plan of Action plan outlines the Government’s commitment to reducing fishing-related captures of seabirds, with clear goals and objectives, supported by an implementation plan. More>>

ALSO:

Housing Issues: Fairer Rules For Tenants And Landlords

The key changes include: - Limit rent increases to once every 12 months and banning the solicitation of rental bids by landlords. - Improve tenant’s security by removing a landlord’s right to use no cause terminations to end a periodic tenancy agreement... More>>

ALSO: