A heads up to Queenstown restaurant and cafes, Inland Revenue are in town! As part of its hidden economy campaign, Inland Revenue sent compliance staff to search and/or make unannounced visits to several Queenstown hospitality businesses. Cafés, restaurants, bars and takeaways were the focus of the campaign which follows the successful prosecution of five family members in the Thai House case (a tax evasion case amounting to over $5 million in undeclared income).
“What happened in the Thai House case was despicable. Cash sales were deliberately suppressed to pay less tax. An aggravating feature was that the declared income of two of the defendants was low enough to qualify for a Working for Families Tax Credit in some years,” said Richard Philp, a spokesperson for Inland Revenue.
Under the table payments
Richard Philp says the hospitality sector has a high risk of cash sales not being reported and employees being paid under the table. When referring to the Queenstown operation he said, “Inland Revenue staff seized wage records, computers and other business records. Staff also seized information on employer provided accommodation, rental properties, working for Families Tax credits and payroll matters.
“Some of the items we removed includes information on staff paid in cash without PAYE being deducted and documents detailing cash deposits into private bank accounts without being returned for GST and income tax purposes. On unannounced visits we seized till records and lists of staff names and work rosters to check against employee details we hold.
“During the operation, a number of taxpayers referred unprompted to the Thai House case and were aware IR was conducting search activities in Queenstown outside of normal business hours.”
Voluntary disclosure
Since the Queenstown operation ended two businesses have indicated they will make voluntary disclosures.
“It’s early days yet in the investigations but it’s always good to see taxpayers or their agents contacting us early after a compliance visit, wanting to make a voluntary disclosure. It helps the taxpayer as they receive a reduction in the penalties imposed,” Richard Philp says.
“Also, we appreciate that investigations can be stressful, and we work with taxpayers to resolve matters in a timely manner so they can get on with their business.”
If you think you’ve paid the wrong amount of tax, or left out cash sales, you can make a voluntary disclosure to Inland Revenue.
Sleep easy
Richard Philp says most hospitality businesses are paying the right amount of tax and have good bookkeeping practices but there are still those that don’t.
“If you’d rather sleep easy at night, keep good records and put cash sales through the till. Our best advice is to record everything, declare every dollar and make sure you’re charging GST if required.
“We visited more than 30 taxpayers in Arrowtown, Queenstown, and Frankton to talk about our ‘Sleep Easy’ campaign and left information about record keeping with them. We want to support businesses to keep good records and ensure a level playing field for all. Everyone should pay their fair share of tax because that’s what pays for the essential things that make New Zealand a great place to live.”
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