Kiwifruit man jailed for evading $244,000 in tax

John Pongi. Photo / Supplied

A company director who deliberately evaded paying almost $244,000 in tax has been jailed for 2 years.

John David Pongi, 46, of Katikati was found guilty last month of two counts of income tax evasion, 11 of evading GST and 18 of failing to pay PAYE. This week, he was sentenced in the Tauranga District Court.

Pongi, a kiwifruit contractor, began trading as Quality Hort Ltd in April 2006 but failed to register the company with Inland Revenue for GST or PAYE.

In two years, he evaded slightly less than $244,000 in taxes, including $137,796 in PAYE and $93,238 in GST.

While engaged in labour contracts in the industry, Pongi would issue GST invoices to orchardists for the work and paid his employees a wage.

But he failed to deduct PAYE or file PAYE returns for the period April 1, 2006, to January 31, 2008.

He also failed to file company tax income returns for the 2007 and 2008 tax years and did not furnish GST returns from April 1, 2006.

Pongi told IRD he knew he owed money but there were no margins in the kiwifruit industry, which he felt should be exempt from taxes. He claimed he thought his withholding tax credits would pay for any arrears he owed.

Inland Revenue said Pongi was aware of his tax obligations because he had previously operated other businesses and had filed returns.

He had also received visits from IRD business tax information officers concerning his GST and PAYE obligations.

Crown prosecutor Hayley Sheridan said Pongi's firm was effectively flying under the radar and came to Inland Revenue's attention only because the orchardists filed returns for withholding tax on behalf of the company.

Pongi's claim that he thought the withholding tax amounts would balance out his tax obligations did not stack up, she said.

Mrs Sheridan said his actions to evade paying taxes were deliberate and calculated.

She said if the total losses were adjusted by deducting withholding tax credits - which could only occur if Pongi filed the tax returns required - the loss to the Inland Revenue would still be $163,963, and that amount still warranted a prison sentence.

Defence lawyer Bill Nabney argued that home detention was the appropriate outcome, citing several recent High Court and Court of Appeal cases in which the offenders received home detention for similar amounts of tax evasion.

Mr Nabney said Pongi had held an honest belief that tax deductions for withholding tax would take care of all his tax responsibilities.

Home detention would allow Pongi to keep working to pay back the tax he owed, Mr Nabney said.

Given Pongi's previous business activities, Judge Peter Rollo rejected the accused's claim that he had made an honest mistake and said a jail sentence was justified.

"This offending involved a serious breach of trust involving our tax system, which requires a significant degree of trust by the Inland Revenue Commissioner in the honesty of individuals and companies to file the necessary returns and pay the tax as required," the judge said.

A deterrent message needed to be sent to Pongi and others in the community that they need to take their tax responsibilities seriously.

IRD assurance investigations manager Jonathan Matthews said later that Pongi had received several visits from departmental staff and was well aware of his tax responsibilities.

'This man was not only cheating taxpayers ... he was getting an unfair advantage over other horticultural contractors who play by the rules."

- APN