Inland Revenue loses $1.3 million to tax evaders

Two South Island businesspersons who evaded the Inland Revenue Department (IRD) from paying their taxes have been awarded prison sentences but would not be able to pay the Department almost more than $1.3 million, as they were declared bankrupt.

The first case related to Thanh Van Tran, a Dunedin based businessman, who was jailed for 12 months by the Dunedin District Court on September 25 on eight charges of failing to file income tax returns and 16 charges of failing to file GST returns.

The former Queenstown man admitted the fraud at the Court.

The offending took place between November 1999 and September 2007, when Tran owned and operated a tiling and waterproofing business in Queenstown.

The Court heard that the defendant started his business in Queenstown in November 1999 and registered his company for GST and that he operated in Southland, Otago, Rotorua and Auckland.

He failed to file income tax and GST returns since the beginning.

In March 2006, Tran converted his business to a company to avoid deductions of withholding tax from his earnings.

“He did not maintain business records, but enquiries with his customers revealed he should have returned at least $343,000 in his GST returns, and $324,000 in his income tax returns,” the Court heard.

IRD Investigations Manager Lynley Sutherland said no reparations were sought from the defendant since he had no funds.

“Bank records indicate he was a regular customer at casinos,” she said.

Property Developer

The second case related to Philip John Duncan, a Christchurch property developer, who pleaded guilty early of defrauding the IRD of more than $660,000 in GST returns.

A Christchurch District Court Judge sentenced him to two-and-half years in prison.

It is understood that the offender conducted his business through a complex structure of associated companies and trusts.

He claimed GST on property purchases that were later cancelled, and filed claims on non-existent transactions.

According to the Prosecution, Duncan bought properties in Alexander Street and Champion Street through ‘CHL Limited’ and claimed GST on the purchase price of the two properties.

“He also claimed GST deductions on proposed building development work. The deals did not go ahead, and Duncan failed to make adjustments in the company’s GST returns,” the Prosecution said.

The total amount evaded on account of GST was $315,245.

The Court also heard that KB Developments Limited bought a property in Meadow Street in 2003 and that Duncan claimed GST on the purchase price.

In 2004, the company also claimed for the purchase of four townhouse units at the same Meadow Street address.

“The deals fell through and the required adjustments were not made in the company’s GST returns. The total amount evaded on this account was $133,222.”

It is understood that Duncan also arranged for ‘Champagne Property Developments Limited’ and ‘Pastoral Holdings Limited’ to claim GST on the purchase of townhouses in Olympic Lane and Meadow Street.

“These transactions never occurred. GST fraudulently claimed amounted to $215,485.

“The total fraud and evasion for all properties amounted to $663,952.”

Ms Sutherland said her Department was unable to seek reparations since Duncan was bankrupt but warned anyone against attempting illegal means of making money.

“Don’t be tempted, it is not worth it. We have measures in place to identify irregularities in tax returns and business records,” she said.