Taxman goes after shady online deals

Inland Revenue Department (IRD) has warned businesses involved in online marketing schemes that they may be breaching the tax laws in force.

It is understood that many are being tempted into network and direct marketing schemes hoping to obtain tax benefits.

IRD Group Tax Counsel Graham Tubb alerted about schemes that involve selling a range of products including household items and dietary and health supplements through what is generally known as ‘Party Plans.’

“People subscribing to such schemes try to get tax benefits rather than starting a genuine business. They could be liable for penalties and interest and stand the risk of being prosecuted for filing false returns,” he said.

Mr Tubb said promoters of some schemes were misleading people.

“People are told to register for GST to allow them to re-claim GST on purchases, many of which just end up being for their personal use. They are also advised that they can claim business-related expenses such as a room in their home used as an office or their telephone line,” he said.

Mr Tubb said his Department was concerned that many persons were not actually in business and hence should not claim business-related expenses.

“Likewise, they should not register for GST, if they sell something only occasionally at fairly low value,” he said.

He said some people may have unwittingly claimed tax benefits to which they are not eligible and hence should discuss their situation with IRD officials.

“If something is wrong with your tax returns, it is better to tell us before we find out through our own investigations.

“Our officials can offer proper advise if people contact us before registering for GST.

“Revenue alerts are an early warning service for tax professionals, designed to highlight any significant or emerging areas of concern for our Department,” Mr Tubb said.

For further details visit www.ird.govt.nz