Auckland director jailed for not passing tax deductions from workers to Inland Revenue

David Gower was sentenced at Auckland District Court after being accused of not passing on employee PAYE tax, nor child support and student loan payments. Photo / Nick Reed

A director of an Auckland fire system installation company has been jailed after workers missed out on more than a million dollars of KiwiSaver contributions.

David John Gower was sentenced for aiding and abetting AFS Total Fire Protection in deducting the money from employee wages, but never passed it on to the Inland Revenue Department.

He was sent a warning letter from the IRD in May 2015 but kept offending.

When he failed to follow through on opportunities to hand over the money in planned repayments, the tax department liquidated AFS in 2016.

At that time, AFS owed $2.6m of pay as you earn (PAYE) tax, $1.3m of GST, and $108,305.28 in unpaid KiwiSaver employer contributions.

And it also owed $40,000 in unpaid employer superannuation contribution tax.

AFS had about 80 employees.

One week into a jury trial at the Auckland District Court, Gower pleaded guilty to a representative charge spanning 49 tax periods, and was sentenced to two years and three months’ jail.

He admitted he was aware of his obligations as an employer and made a reparation payment of $300,000.

“Prosecutors told the jury that carrying on a business without paying taxes is unfair to employees, unfair to other businesses and unfair to other taxpayers,” Inland Revenue said in a written statement.

AFS’ final liquidator’s report by KPMG, dated July 16, 2021, said the company’s business and assets were sold to Stonewood Fire Services.

The report cited Gower’s reasoning for the liquidation, as “cash-flow issues and a failure to renegotiate lending terms with the ASB bank”.

Gower was an existing shareholder of two businesses, according to Companies Office records.

Correction: This story has been updated to fix an incorrect headline and first paragraph in which incorrect figures were used.