Tax evasion and fraud nearly doubles

Tax evasion and fraud increased from $75 million to $127 million over the past year showing the effect of hard economic times.

The Inland Revenue Department says it has completed numerous nationwide investigations and successfully prosecuted 35 people for evasion and fraud, involving over $24 million in tax.

The average sentence given so far is 18 months in prison, although the IRD says it has a number of prosecutions underway involving more than $19 million in evaded tax.

This news comes just weeks after figures were released from the Serious Fraud Office, saying serious fraud involving mortgage, property and professional advisers has doubled since March 2008.

An IRD spokesperson says it has seen an increase in GST fraud with many dishonest attempts to get GST refunds, including the use of fictitious identities and false documents.

"Information from a variety of sources suggests a high level of coordination by a small number of people."

The IRD says it will be intensifying its focus on GST by further strengthening its screening process to identify high risk refunds as they are filed.

The IRD also says that tax evasion schemes have been operating in the agricultural and horticultural industry for a number of years.

"These schemes result in contractors being able to greatly reduce their GST, PAYE and income tax liabilities.

"This is because the agricultural and horticultural industries are seasonal with a transient workforce, not only moving around New Zealand, but also travelling in and out of the country."

To counter this, the IRD says it will continue to develop relationships with agricultural and horticultural industry groups.

It will use information gathered from past investigations and interviews with participants in schemes to identify key features, investigate people who are involved in an evasion scheme, and where appropriate, undertake further prosecution activity.

To deal with the increase in illegal activity, the IRD says it will work with the Serious Fraud Office, Organised Financial Crime Agency of New Zealand and the Combined Law Agency Group to combat serious organised crime and complex fraud through an interagency approach.

It will also assess the potential impacts of the new Criminal Proceeds Bill and the Anti-Money Laundering and Countering Financing of Terrorism Bill.

The IRD says it recognises that the world keeps moving and that New Zealand is a small open economy, susceptible to global trends, rapid changes in business priorities, new technological developments and demographic shifts.

"We must address any new compliance issues that emerge during the year and change our priorities and vary our plans in response."

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