Leap in cases as IRD boosts war on tax evasion

The taxman has hammered fraudsters and dodgers this year - with the number of successful prosecutions already eclipsing last year's count.

Inland Revenues figures released to the Herald show 57 people have been convicted and sentenced for tax fraud or evasion charges, including one case which resulted in a four-year jail sentence.

Inland Revenue could not reveal the exact amount of money this year's cases totalled, but the largest sum involved in a single prosecution was nearly $1.5 million.

The figures, which compare with the 53 offenders successfully prosecuted last year, back up Inland Revenue's 10-year goal to return almost five times the $85 million it was allocated in last year's Budget.

One of Inland Revenue's head investigators told the Herald yesterday that the department was working smarter and with more staff and resources to help it crack down on a black economy thought to be costing the Government as much as $11.4 billion each year.

"We have been slowly increasing our profile, but I think we are just getting better at what we are doing," Inland Revenue investigations assurance manager Tony Morris said.

In one of Inland Revenue's latest prosecutions, Tauranga property developer Angela Beckett was jailed for 2 years after being found guilty of multiple charges, including five counts of providing false GST returns to obtain a refund.

Beckett was involved in a property development partnership, Ant Hill Developments, and a company, Three Fish Developments, making false claims through both entities, including the alleged purchase of a property in which she was living.

Inland Revenue estimated she illegally obtained more than $135,000, failed to pay nearly $37,000 in GST on her business sales, and tried to claim a further $60,388 by filing a false return.

"Prosecutions have been increasing in recent years as a result of our targeted risk-based investigations. This approach is based on such factors as behavioural trends and identification of emerging issues," Mr Morris said. Dragging offenders to court was a last resort when all efforts to recover the debt owing have failed, he said.

"Overall, we are on target to deliver our targets in terms of financial returns as well as making significant progress in terms of our proactive work to assist and educate people."

Specific areas being targeted this year include property, new immigrants, large enterprises, tax agents, central and local Government and those the Inland Revenue described as "habitual non-compliers".

Another focus is the Rugby World Cup, bringing an estimated 85,000 tourists and half a billion dollars to the country.

Inland Revenue has already warned it will monitor websites and other places that homeowners will use to rent out their houses, as well as scalpers who buy game tickets for resale. It would also target busy bars and restaurants that tried to take on temporary staff and pay them under the counter.

But tax expert Jeff Owens said while Inland Revenue was improving at information collection, he believed the department had a long way to go on efficiency.

"I have seen audits which should have been able to be turned around in few weeks drag out for years, which costs the taxpayers tens of thousands of dollars," said Mr Owens, who has put a submission to IRD Commissioner Bob Russell and Revenue Minister Peter Dunne calling for a set of protocols for conducting tax investigations and audits.

"I'm not necessarily saying that all IRD staff do that, or that it happens all the time, but it happens too often.

"The IRD has been given resources to step up its audit capacity and there is no doubt that as a result of that, it collects tax of a quantum many times the amount that they spend on doing it - but that doesn't mean the IRD is operating in an efficient way."

This month, Inland Revenue drew criticism after it scrapped a new student loan software system it poured $21 million into.

THE NUMBERS

$11.4b estimated cost per year to Government of NZ black economy.

$1.5m the largest tax evasion prosecution this year.

$390,000 the average amount of tax evasion in cases brought this year.

$400m the amount IRD expects to recover over the next decade.

$85m IRD's war chest to tackle tax evaders over the same period.