Last week the Tauranga District Court sentenced an Adrian Ace, an agricultural contractor, to twelve months in prison for evading his PAYE and GST tax obligations. Adrian plead guilty to 28 charges of failing to properly account for PAYE for the employees at his company Pride Contracting Limited. He had also pleaded guilty to three charges of evading GST. Cumulatively, the company owed approximately NZD 55 000 to the Inland Revenue Department.

According to the IRD’s investigations manager Jonathan Matthews, Adrian Ace was first contacted by the IRD regarding his company in August 2005, when a repayment plan was established to help him pay back over NZD 21 000 in due taxes. Only six payments were made, and soon after the defendant stopped filing GST returns. Between July 2006 and December 2007 the company also ceased to make PAYE payments.

During an interview with the IRD, Adrian Ace admitted that he had used his employees’ PAYE payments to cover his own personal expenses, including rent and petrol. He added that when his company was still operational he routinely used the company bank account to pay for his own recreational activities.

Jonathan Matthews explained that Adrian Ace claimed not to understand his full tax obligations, regarding his employees’ PAYE payments, and had disregarded the IRD’s letters concerning the mistakes.

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The Government and the Inland Revenue Department (IRD) are urging New Zealand taxpayers to give comment on planned changes to tax administration. On June 15th the Making Tax Easier proposal was introduced, along with a public consultation period lasting until July 23rd.

For individual taxpayers, the IRD has proposed creating a new digital portal, which would theoretically allow individuals to manage all their tax affairs. The idea is promised to be similar to internet banking in regards usability and security. New software standards have also been suggested, which will improve the reliability and timeliness of PAYE tax data.

For corporate clients, the IRD is suggesting the implementation of advanced internet-based information sharing which will allow accounting software to manage routine business related tax tasks. It is envisioned that the applications will share IRD-held information on a businesses employees and automatically adjust their PAYE requirements. Within the discussion, the IRD has also invited comment on the idea of mandating electronic filing for non-for-profit organizations.

Additionally, the IRD has proposed instating a new Government inter-department information sharing system, claiming it will reduce redundancy and data gathering. Concerns have already been raised about possible privacy implications for the idea. However, the initiative could reduce incidence of tax evasion or money laundering.

Comments on any of the proposals can be submitted via the Making Tax Easier website.

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On April 12th the Wellington District Court sentenced Lance Christopher James to two years jail time for 19 separate tax evasion charges amounting to NZD 365 184. Lance James pleaded guilty to eight charges of failing to file a personal tax return or paying appropriate tax obligations, and 11 charges of failing to pass on employee PAYE deductions. Despite having repaid some of the tax obligation, Lance James still owes NZD 168 000, excluding penalties and interest charges. James has been refused bail pending appeal of his sentencing.

Patrick Goggin, IRD Investigations Assurance Manager, issued a warning to others considering any form of tax evasion, saying, “Others who are tempted to cheat on their taxes should take note of this sentence and be left in no doubt of the very serious consequences if they choose that path.”

Lance Christopher James has held positions as a self-employed property developer since 1993. In many cases, Lance James acted as the sole director and shareholder for his development firms. In 2008, an arrest warrant was issued for James for aiding and abetting Brooklyn Holdings Ltd, Ohiro Properties Ltd, Complex Properties Ltd, Wadestown Properties Ltd, and Brooklyn Rise Ltd to commit tax evasion.

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From January 7th donations made automatically from an employees pay package will be eligible for automatic tax credits, bypassing the previous system of end of year claims. Employees will receive a third of the donation amount back through a PAYE tax credit. Describing the ease of use of the new system Peter Dunne, Revenue Minister of New Zealand, said “…it’s really convenient for workers, is low-cost and effective for charities, and helps employers and their staff become more engaged with the community”.

The new law was enacted in the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill, which received Royal assent on October 6th. Though the concept of payroll-giving has been debated by the New Zealand Government since discussion documents on the subject were released in 2006.

The law change has received wide praise amongst charities and NGOs both for its encouraging employees to donate and its convenience. Commenting on the legislation Les Stephenson, CEO of World Vision New Zealand, said, “…this will definitely help people as they try to balance their monthly household budgets, especially in these tougher economic times”.

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Georgie Jensen was sentenced on December 3rd, in the Waihi District Court, after pleading to 13 counts of non-payment of PAYE. Graham Pomeroy, Inland Revenue Assurance Manager, commented on the offences, saying “Failure to meet PAYE obligations is a breach of trust between the director and the employees. But in Jensen’s case, it wasn’t just PAYE but also child support and student loan deductions”.

Georgia Jensen was the director, sole shareholder and an employee of NZ Rigging Services Limited, which she incorporated in 2007. In the period between March 2008 and May 2009, a total of NZ$74,016.69 of PAYE and other employee deductions was withheld from the IRD. Georgia Jensen Since it incorporation, only NZ$7,000 of PAYE payments have been filed by NZ Rigging Services.

Reparation was not sought by the judge, as Georgia Jensen is currently unemployed. Though he did label her actions as “premeditated and deliberate”. Graham Pomeroy commented further by saying that when tax payers act against the system, they not only compromise the integrity of the tax system but cheat the community.

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On the 18th of September it was announced by Peter Dunne, New Zealand Revenue Minister, that governmental allowances had been given to proposed changes to the student loan system. The changes were a product of consultation held in June. In a statement , Peter Dunne said “As a result of hearing a wide range of views, the government has modified one of the main proposals that were presented for consultation a couple of months ago.”

Several changes to the Student Loan scheme were initially proposed by the government, although these were amended after consultation. The most important of these changes includes the dropping of plans to charge student loan repayments if over $367 is earned per week as holiday pay. Instead, this has been replaced with a yearly earning limit of $19,084, below which no repayments are required. Another significant change is the decision to migrate from paper-based management to an electronic system, both internally and for borrowers wishing to access their loan information. Dividends, interest and Maori authority distributions will not be regarded as income if they are under $1,500 annually. Those residing and working in New Zealand will now have their student loan payments deducted along side their PAYE on the same scale as there wages.

Somsanit Phommasa, a West Auckland based tiler, admitted to 121 separate charges of GST, PAYE and income tax evasion. In the period between 1998 and 2007 is accused of having accumulated $1,617,705 worth of evaded taxes.

Charges included imposing GST on customers while making no attempt to pass it onto the Inland Revenue Department. The GST fraud amounted to $479,607. Income tax was also not paid during the same period, it totaled $1,138,098. No PAYE was passed on from employees of Somsanit Phommasa to the IRD.

James Ivan Woollams, owner of Cabana Gifts in Te Kuiti and accountant, has pleaded guilty to 76 charges involving PAYE and GST fraud. In the time between April 1998 until March 2004 James Woollams employed five shop assistants, in that time he failed to pass any of their PAYE deductions to Inland Revenue.

The fraud was discovered when the employees approached Inland Revenue wanting to know why they had no earnings recorded to their name. Request were sent for records to James Woollams, but were ignored. Statute demands were then issued, but also ignored.

Investigations yielded evidence of $21,483 in missing PAYE deductions and $3,784 was understated in GST. This amount will need to be paid back, and at the time of writing this was yet to occur.

The former lifetime Surf Life Saving member and manager, Alison Douglas was sentenced to three and a half years jail time, after pleading guilty to 23 charges of tax fraud involving PAYE. Deductions from employee wages were taken by Douglas herself and not paid to the IRD. These amounted to $61,518.61 in total, or $88,538.87 after penalties and interest, after the $11,910.44 she has already made.

Separately, Alison Douglas also pleaded guilty to 18 charges of fraud and 1 charge of theft in a case brought forward by the police. Douglas had also overpaid herself by $198,764 in the years between 1998 and 2008, along with spending $6783 on un-authorized travel for herself and her family. Under questioning she justified this by claiming that she was bringing her own pay in line with other region’s Surf Life Savings managers, and the amount of work she was doing.

Kevin Wayne Frazer, former director of Total Taxation and Accounting Services pleaded guilty in a Tauranga District Court on the 15th of December, to 68 charges of unpaid income-tax, GST, PAYE, fringe benefit taxes and student loan repayments. According to an IRD statement, income tax to an amount of $46,330, GST of $384,356, PAYE of $105,965, Fringe Benefit Tax of $2468 and student loans of $597 were not paid by Mr. Frazer. With Inland Revenue Department fines and charged interest, Kevin Frazer currently owes the IRD a total of $806,096.

According to the IRD there were no GST or income tax returns filed for Total Taxation and Accounting Services since mid-2001.

Judge Rollo of the Tauranga Court decided that due to Kevin Wayne Frazer’s personal and health issues, home detention would be permissible.