Winebox Inquiry
Encyclopedia
The Winebox Inquiry was an inquiry undertaken in New Zealand
to investigate claims of corruption
and incompetence in the Serious Fraud Office (SFO) and Inland Revenue Department
(IRD).
The full name of the Inquiry was the Commission of Inquiry into Certain Matters relating to Taxation. The Commissioner was Ronald Davison
. The Commission concluded that there were no grounds supporting the allegations of fraud and corruption. The inquiry was characterized by extensive litigation, both during and afterwards and by an extremely high level of public interest. The Commission was established in September 1994 and reported nearly 3 years later in August 1997
brought the documents at the centre of the allegations to Parliament in a winebox. The wine box contained numerous documents relating to a range of transactions entered into or contemplated by a number of parties.
The genesis for the inquiry was repeated claims by Winston Peters of criminality associated with tax planning undertaken by some of New Zealand’s largest companies (some involving tax deals with the Cook Islands
) as well as fraud and incompetence by both the Inland Revenue Department and the Serious Fraud Office. Public pressure eventually forced the government to set up the Inquiry.
In September 1986 European Pacific Investments (EPI) was incorporated. Magnum was a company owned by EPI. It paid the Cook Islands government $2 million and received a tax certificate which was presented to the tax office in New Zealand. Once presented, EPI received a tax credit of the same amount. Meanwhile, back in the Cook Islands, another member of the EPI group received a refund of $1.95 million from the government, the net effect being that the EPI group had effectively paid the Cook Islands government $50,000 but received a New Zealand tax credit of $2 million.
The Law Commission
identifies 4 court cases which arose during or immediately after the inquiry which indicates the degree of litigation and controversy surrounding it. There were also other court cases (for example against TVNZ) which related to the subject matter of the inquiry.
Subsequent appeals were made to overturn the Commission’s findings. Most notable of these was a case for judicial review
taken by Winston Peters against the Commissioner which effectively upheld Davison’s findings. A subsequent ruling of the Court of Appeal overturned this finding and referred the matter back to the High Court. The final ruling of the High Court was that 4 of the findings of the Commission which related to the Magnum transaction were struck out as a result of errors in law by the Commission and associated criticisms of Winston Peters to the extent they related to those errors in law. The Court stated:
Unsurprisingly both sides to the debate claimed victory.
To this day controversy remains as to who “won” .
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
to investigate claims of corruption
Corruption
Corruption usually refers to spiritual or moral impurity.Corruption may also refer to:* Corruption , an American crime film* Corruption , a British horror film...
and incompetence in the Serious Fraud Office (SFO) and Inland Revenue Department
Inland Revenue Department (New Zealand)
Inland Revenue , previously known as the Inland Revenue Department, is the New Zealand government department responsible for the collection of over 80% of the Crown's revenue in New Zealand. It also collects and disburses social support programme payments and provides the government with policy...
(IRD).
The full name of the Inquiry was the Commission of Inquiry into Certain Matters relating to Taxation. The Commissioner was Ronald Davison
Ronald Davison
Sir Ronald Keith Davison, GBE, CMG, QC was the tenth Chief Justice of New Zealand from 1978 to 1989.Sir Ronald headed the government inquiry into certain matters related to overseas company taxation, popularly known as the Winebox Inquiry. This involved allegations against a number of parties...
. The Commission concluded that there were no grounds supporting the allegations of fraud and corruption. The inquiry was characterized by extensive litigation, both during and afterwards and by an extremely high level of public interest. The Commission was established in September 1994 and reported nearly 3 years later in August 1997
Popular name
The Commission became popularly known as the Winebox Inquiry, as Winston PetersWinston Peters
Winston Raymond Peters is a New Zealand politician and leader of New Zealand First, a political party he founded in 1993. Peters has had a turbulent political career since entering Parliament in 1978. He served as Minister of Maori Affairs in the Bolger National Party Government before being...
brought the documents at the centre of the allegations to Parliament in a winebox. The wine box contained numerous documents relating to a range of transactions entered into or contemplated by a number of parties.
History
In 1994 the Winebox Inquiry was formed. The terms of reference of the Commission of Inquiry required it to report upon whether the Inland Revenue Department and the Serious Fraud Office had acted in a lawful, proper and competent manner in dealing with the relevant transactions, and to examine whether any changes to the criminal or tax laws should be made for the purpose of protecting New Zealand's income tax base from the effects of fraud, evasion and avoidance.The genesis for the inquiry was repeated claims by Winston Peters of criminality associated with tax planning undertaken by some of New Zealand’s largest companies (some involving tax deals with the Cook Islands
Cook Islands
The Cook Islands is a self-governing parliamentary democracy in the South Pacific Ocean in free association with New Zealand...
) as well as fraud and incompetence by both the Inland Revenue Department and the Serious Fraud Office. Public pressure eventually forced the government to set up the Inquiry.
The Magnum Transaction
The transaction at the centre of the Winebox Inquiry was known as the “Magnum” transaction. This is largely because it was the focus of much of the subsequent litigation. In fact there were more than 60 different transactions involving a range of parties contained in the documents in the “winebox”.In September 1986 European Pacific Investments (EPI) was incorporated. Magnum was a company owned by EPI. It paid the Cook Islands government $2 million and received a tax certificate which was presented to the tax office in New Zealand. Once presented, EPI received a tax credit of the same amount. Meanwhile, back in the Cook Islands, another member of the EPI group received a refund of $1.95 million from the government, the net effect being that the EPI group had effectively paid the Cook Islands government $50,000 but received a New Zealand tax credit of $2 million.
Controversy
Although the Commission concluded that there was no fraud or incompetence, controversy surrounded these rulings.The Law Commission
New Zealand Law Commission
New Zealand's Law Commission was established in 1986 by the Law Commission Act 1985. The Commission is a Crown Entity under the Crown Entities Act 2004....
identifies 4 court cases which arose during or immediately after the inquiry which indicates the degree of litigation and controversy surrounding it. There were also other court cases (for example against TVNZ) which related to the subject matter of the inquiry.
Subsequent appeals were made to overturn the Commission’s findings. Most notable of these was a case for judicial review
Judicial review
Judicial review is the doctrine under which legislative and executive actions are subject to review by the judiciary. Specific courts with judicial review power must annul the acts of the state when it finds them incompatible with a higher authority...
taken by Winston Peters against the Commissioner which effectively upheld Davison’s findings. A subsequent ruling of the Court of Appeal overturned this finding and referred the matter back to the High Court. The final ruling of the High Court was that 4 of the findings of the Commission which related to the Magnum transaction were struck out as a result of errors in law by the Commission and associated criticisms of Winston Peters to the extent they related to those errors in law. The Court stated:
- “Declarations (1) to (4) [striking out the 4 findings relating to Magnum] are not, and are not intended to suggest, findings by this Court that there has been fraud or incompetence. The effect of the declarations is as if the words in the Winebox report to which they relate were crossed out, leaving the Winebox report incomplete in these respects. Declaration (5) [striking out the related criticism of Winston Peters] will ameliorate the criticisms made of the plaintiff which are related to those errors. The Winebox report remains otherwise unaffected.”
Unsurprisingly both sides to the debate claimed victory.
Aftermath
Changes to tax laws relating to the claiming of foreign tax credits were made. New rules relating to disclosure to the Inland Revenue Department and penalties for non-compliance were introduced.To this day controversy remains as to who “won” .