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Top tips on IRD Prosecutions in New Zealand.

IRD Prosecutions in New Zealand.

If you find yourself in the position of being prosecuted by the New Zealand Tax department then these questions listed below may be of help to you.

Mary Nelson is a qualified and experienced barrister and solicitor/ tax lawyer and can help you with all IRD prosecutions and enquiries.

What is the process for an Inland Revenue prosecution?

An Inland Revenue prosecution is initiated when Inland Revenue discovers that a taxpayer has intentionally not met their obligations in terms of filing and/or paying taxes. In such cases, the Inland Revenue Department (IRD) may decide to take legal action, which could involve a criminal prosecution.

The process for an Inland Revenue prosecution may include the following steps.

  1. Inland Revenue carries out an audit and decides whether to pursue a prosecution.
  2. Inland Revenue files charging documents in the District Court. The charging documents state the basis on which Inland Revenue believes an offence has been committed.
  3. The charging documents are personally served on the taxpayer and state the time and date the taxpayer must attend court.
  4. At the first court appearance, bail conditions may be imposed, such as the requirement to surrender your passport, and the matter is adjourned to a new court date.
  5. You should not need to enter a plea at the first court appearance. You should enter your plea only when you have enough information to assess properly the nature of the IRD charges.
  6. If you plead not guilty you are able to change your plea to guilty at any time, even after the trial has started. If you have pleaded guilty you can only change your plea to not guilty in very limited circumstances and with the leave of the Court.
  7. If you plead guilty, it is possible to get a sentence indication from a judge prior to the actual sentencing. The sentencing indication is not binding on the Court, and you may end up being sentenced by another Judge altogether, but it will be a clear indication from the sitting Judge of the range within which he or she sees your sentence as likely to fall.
  8. In some cases, Inland Revenue may also seek a confiscation/ forfeiture order to recover any unpaid taxes.

What types of activities can lead to an Inland Revenue prosecution?

  1. Not filing tax returns with the intention of not paying (evading) tax, including child support
  2. Making false or misleading statements on a tax return or in any other document supplied to the Inland Revenue.
  3. Claiming fraudulent tax credits or deductions.
  4. Providing altered, false, incomplete or misleading information to Inland Revenue with the intention of evading tax.
  5. Participating in a tax avoidance scheme.
  6. Refusing to supply documents or information requested by the Inland Revenue.
  7. Operating a business without registering with the Inland Revenue
  8. Intentionally not providing correct information when asked to do so and obstructing Inland Revenue from doing its duty.
  9. Not making a legally required deduction or withholding of taxes, such as PAYE, GST, Student Loan deductions, and employee KiwiSaver contribution or child support.

What are the penalties for an Inland Revenue prosecution?

The penalties for an Inland Revenue prosecution can vary depending on the type of offence. For tax evasion, an individual may be fined up to $50,000 and face up to five years in prison.
For more serious offences, an individual can be fined up to $200,000 and face up to seven years in prison.
The court can also consider other measures such as confiscation of assets and public notifications.

What steps should I take if Inland Revenue is investigating me?

  1. Remain calm and do not provide any information without first consulting with a professional tax lawyer.
  2. Collect all relevant documents related to the case and keep them secure.
  3. Request a copy of the disclosure letter from Inland Revenue.
  4. Contact a professional tax lawyer to discuss the case.
  5. Cooperate with the Inland Revenue investigation and provide requested information.
  6. Keep all communication with the Inland Revenue in a documented and organised manner.
  7. Follow the requested steps to resolve or appeal any proposed or assessed tax liabilities.
  8. Prepare for a potential interview with the Inland Revenue
  9. Speak to a lawyer for legal advice regarding any potential criminal charges or other enforcement action.
  10. Stay informed about the progress of the investigation and attend any hearings or meetings related to the case.

Does Inland Revenue have the power to prosecute individuals or only companies?

Inland Revenue has the power to prosecute both individuals and companies. An individual may be prosecuted for aiding and abetting a company to commit an offence. For example, aiding and abetting a company to not pay PAYE.

Depending on the situation, civil penalties may also be imposed.

It is also an offence to pretend to be another person for purposes relating to tax law, or to help someone else commit an offence.

What is the standard of proof required for an Inland Revenue prosecution?

The standard of proof required for a person to be convicted in an Inland Revenue prosecution is “beyond reasonable doubt”. This is the same standard of proof required for any criminal prosecution in New Zealand.

Are IRD penalties tax deductible in New Zealand?

No, IRD penalties are not tax deductible. The Inland Revenue Department of New Zealand states that “penalties and interest imposed by the department are not deductible for income tax purposes.