There is a perception – unwarranted perhaps- that the Inland Revenue Department (IRD) is ‘out there to get them.’
That is true when you do not pay your fair share of tax and steal from the taxpayer.
People must understand that they have to pay the correct amount of tax, whether it is Income Tax, Goods & Services Tax (GST), Corporate Tax or Fringe Benefit Tax (FBT).
The notion that you can get away with it may seem worth taking at first instance until you get caught.
I have seen many cases during my tenure with the IRD and now as a private practitioner.
During my tenure with the Department prosecuting cases, I wondered as to why people do business the way they did, not remitting GST, PAYE and no cash declaring transaction in a business. I also wondered why some businesses used one set of forms for banks to obtain loans and another set for the IRD.
It amazed me always, as if, the investigators in the IRD will not do all the basic checks.
I conduct seminars for Malaysian Customs Department in Malaysia on GST fraud, using the New Zealand model. New Zealand investigation techniques are recognised and appreciated throughout the world.
The most common ‘excuse’ (I use the word ‘excuse’ because I believe that it is usually not seen as a mitigation point) is that the taxpayer would rather keep jobs than pay taxes and take such measures to keep their business afloat.
Let me assure you that there is not a defence for a charge under the Tax administration Act or Crimes Act. There are ways of solving issues and the first thing a taxpayer needs to consider is to get the right advice. It is extremely pertinent that you get good advice, adapt a sound strategy and deal with the Inland Revenue.
You can dance with IRD. By that I mean work with them, talk to them, get the right people to negotiate on your behalf. The officials will listen, although some of them will be tough and unrelenting.
You can exercise your right and appeal for a change, and ask another officer to examine your files. Do not challenge any official unless you have a valid and sound case or a good legal argument. Even then, please bring it up early and try to resolve it.
This will save you a lot of money and troubles.
The last thing you must do is ignore letters or calls form the IRD.
There is also no point delaying as interest and penalties accrue faster than a bullet train.
Do not delay for the sake of delaying, if you need time, say so, because the law allows reasonable time.
You must be aware the IRD neither forgets nor forgives.
There are systems in place to follow you and your business. The Department has enormous resources and expertise to enforce compliance and bring defaulters to justice.
I found during my tenure at IRD that most of the tax prosecutions could have easily been avoided, if the taxpayers had sought and obtained proper advice.
In private practise, I notice the same trend. When a matter comes to me, it could have been avoided if the right strategy was used in the first place.
The Income Tax Commissioner would be willing to listen and can temper justice with mercy. Sometimes facts are kept from her deliberately and that can make her job extremely frustrating. The Commissioner and Chief Executive of IRD has enormous powers to get information from relevant agencies relating to your taxes.
Most tax prosecutions are straight forward since the investigator or debt officer would have done an enormous amount of work to make sure that they have got it right.
There are many checks and balances before a prosecution commences.
Prosecutions and ultimately jail time can be avoided if you get the right advice from the beginning. If your tax professional tells you, that you have a sound defence, by all means, defend. Otherwise please do not waste your time and money.
Dave Ananth is an experienced tax barrister practicing in Auckland. A graduate from the University of Canterbury, he was admitted to the High Court in 1989. He was an Inland Revenue Prosecutor based in Manukau for a number of years before launching his private practise. He is currently on a two-year tour of duty in Malaysia advising on GST compliance and other tax matters.
Mr Ananth is a regular speaker at various conferences and seminars. He is also a speaker at the Royal Malaysian Customs Seminar on GST Fraud and Investigations. www.davetaxnz.nz