The IRD classes tax offences as either absolute liability offences (maximum fine $12,000), knowledge offences (maximum fine $50,000), or evasion offences (maximum fine $50,000, and may be also be subject to a maximum imprisonment period of 5 years).
Illegally avoiding paying income tax can lead to jail time, or a 150% penalty on the tax evaded.
Other offences include failing to:
- Issue a tax invoice within 28 days of being asked to
- Keep legally required books and documents
- Provide information, including tax returns and forms, when you’re supposed to
- Account to the IRD for tax deducted or withheld
Or doing the following:
- For GST purposes, issuing two tax invoices for the same taxable supply
- Providing altered, false, incomplete or misleading information to IRD
- Evading assessment or payment of tax by yourself or anyone else
- Obtaining a refund or payment of tax knowing that you're not entitled to it
- Helping another person to get a refund or payment of tax, knowing that he or she isn't lawfully entitled to it.
Apart from PAYE, there is also potential liability if your business fails to follow the law relating to annual leave.
Labour inspectors employed by the Department of Labour enforce employee rights in the Holidays Act 2003. A breach by a company may cost up to $50,000 for an individual and, for a company, the greater of $100,000 or three times the financial gain made by the company.
It’s clear that several things are essential when it comes to keeping on top of your tax liabilities - those are having:
- Good records
- Access to accurate, comprehensive tax knowledge
- Open channels of communication with the IRD.
Other simple steps can help your business stay on the straight and narrow:
- Deposit money regularly into a separate bank account to cover tax payments
- Create a due date calendar
- Bring in tax advice if there are knowledge gaps in your business.
As a businessperson, you want to avoid running into tax minefields and being treated for your injuries by the IRD.
