Alarming 2015 total draws call for greater recovery powers but others in industry disagree
Taxpayers were ripped off nearly $11 million this year by tax evaders, with disgraced Heart of the City chief executive Alex Swney taking the dubious title of being the country’s biggest tax fraudster of 2015.
Inland Revenue Department prosecuted fewer people in 2015 than the year before, but the value of the frauds was bigger.
Taxpayers lost $10,929,259 to people who committed imprisonable offences — excluding fine-only charges for which the IRD gets convictions — sparking calls for the department to have more powers around recovering stolen monies.
Ernst and Young tax partner Joanna Doolan said the IRD needed the ability to freeze alleged fraudsters’ bank accounts until proceedings were settled in court so that it reduced the ability for funds to be spent.
Others in the industry aren’t sure the idea will wash with Kiwis, while the Revenue Minister has confirmed it’s not something on his agenda for 2016.
Former Heart of the City chief executive Alex Swney was jailed for just over five years for stealing $2.5 million from the organisation and failing to pay $1,792,272 in tax.
Inland Revenue group tax counsel Graham Tubb said at the time he welcomed the sentence, saying Kiwis can be confident people like Swney will eventually be caught.
Former New Plymouth retailers Jianbin Wang and wife Fenglan Liu were more creative when IRD began investigating, and sold their home and three businesses, forwarding much of the proceeds to bank accounts in China. They also withdrew large sums of cash from ATMs and banks around the North Island.
The couple were jailed for their offending but have appealed on the basis the department overstated the amount of money stolen.
Ms Doolan said the department should be able to freeze people’s bank accounts in extreme cases.
“The delays in getting to these people often mean that the money is spent before they try and recover it. As soon as there’s an indication of tax evasion then the IRD, in my view, should have the power to freeze people’s bank accounts and look to recover the taxes because prosecuting them is so far down the track that people like Alex Swney have spent the money. He’s off to jail at the expense of the taxpayer so who wins in this situation?”
Ms Doolan said the change could be made by an amendment to the Tax Administration Act.
Greg Harris, a tax partner at Deloitte, believed the law change would be unlikely to work as it would mean the accused was being treated as guilty rather than innocent.
“These things are fine in theory but normally by the time the charges are laid and the hearing has taken place the money’s long gone. If you empower the IRD to do anything earlier than that, you end up getting a sort of dictatorship where you’re guilty until proven innocent. I’m not sure there’s a lot of scope, especially in a society like New Zealand, to give them any powers greater than what they’ve got at the moment.”
An IRD spokesman said it could already freeze bank accounts with court approval.
“If we consider the account balance results from criminal evasive behaviour, the accounts can be frozen, restrained and forfeited by applying to the High Court using the Criminal Proceeds (Recovery) Act 2009 [CPRA], with the co-operation of the police.
“If Inland Revenue suspects there is a likelihood that the contents of a bank account may be dissipated, we are also able to make an application to the court for an asset freezing order.”
The freezing can also apply to any asset, he said.