Finance: Rugby renters on IRD hit list

By Jeremy Tauri


Ever asked for a discount if you pay for something in cash?

Or, if you're in business, have you ever taken a payment in cash and forgotten to declare it on your income tax return?

The IRD has its eye on cash deals and, for the 2011-2012 year, has identified more than $135 million in audit discrepancies as a result of cash jobs, fraud and criminal activities.

It is vigilantly on the hunt for people not paying their share of taxes.

Industries on the hit list include hospitality, construction, online trade and short-term rentals and accommodation.

About 1100 taxpayers who offered residential properties for rent during the Rugby World Cup were contacted about the tax implications.

This is how it starts. A letter discusses your industry, issues the IRD has identified and an opportunity for voluntary disclosure - a chance to fess up.

Online trading seems to be popular among tax evaders because you can appear to be anonymous.

But the IRD is watching traders who have a pattern of buying and selling for a profit. Profit means there's tax to pay.

Anyway, by the time you deduct 15 per cent GST then another 30 per cent for income tax, a $1150 sale leaves you with $700 for your service or product. Is there an attraction to do the job for 20 per cent less and cash in on $920 cold hard cash for your pocket instead, tax free?

Or, on the other side, if a tradesman says to a client "that job is usually $1150 or I can do it for $920 cash" does that sound like a bargain?

Probably, but if you're caught think of the penalties, 150 per cent for tax evasion, plus interest, plus legal fees, or in some cases worse - five years in prison and an additional fine of $50,000.

The IRD has completed 99 prosecutions, in the year ended May 31, of taxpayers operating in the hidden economy, and is gaining more ground by publishing and benchmarking data used in assessing margins, profits and costs as part of its audit process.

There are problems other than tax shortfalls that occur when you don't declare your income. What about the consequences of an accident that leaves you being paid out 80 per cent of your declared income? Or If you're trying to sell your business and you can't count the cashies, it's going to impact on your price.

About $7 billion in lost tax is the figure the hidden economy hides. What better facilities could we have as a country if that were banked by the Government?

- Hamilton News

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_a3 at 02 Sep 2014 09:00:03 Processing Time: 451ms