Penalties and interest: Criminal penalties

Types of tax offences

Criminal offences attract the same penalties regardless of the type of tax involved.

The penalties apply to all taxes and duties, including PAYE deductions, GST, fringe benefit tax (FBT), employers' deductions of child support and student loan repayments.

Following are the main types of offences and their associated penalties.

Absolute liability offences

Failing to keep the books and documents as required by law, failure to provide information (including tax returns and forms) to Inland Revenue, and failure to issue a tax invoice within 28 days after a request is made, are absolute liability offences.

The penalties for conviction of an absolute liability offence are up to:

• $4,000 for a first offence
• $8,000 for a second offence
• $12,000 for any subsequent offence.

Knowledge offences

Knowingly breaching a tax obligation may result in a conviction for several offences.

Such offences include knowingly:

• not keeping legally required books and documents
• not providing information, including tax returns and forms, when required to do so
• providing altered, false, incomplete or misleading information, including tax returns and forms
• not accounting to Inland Revenue for tax deducted or withheld
• not deducting or withholding tax when required to do so
• for GST purposes, issuing two tax invoices for the same taxable supply.

If you didn't have the information requested, or failed to make or account for schedular payments (formerly withholding payments) for reasons beyond your control, you won't be prosecuted.

The penalties on conviction for knowledge offences are up to:

• $25,000 for a first offence
• $50,000 for a later offence.

However, the penalty for knowingly using tax deductions for any purpose other than payment to Inland Revenue is imprisonment for up to five years and/or a fine of up to $50,000 for each conviction.

Evasion and similar offences

Certain actions are regarded as evasion offences if they are done either to:

• evade the assessment or payment of tax by yourself or anyone else, or
• obtain a refund or payment of tax in the knowledge that you're not lawfully entitled to it, or
• enable someone else to obtain a refund or payment of tax in the knowledge that the other person isn't lawfully entitled to it.

Criminal offences relating to evasion include knowingly intending to evade tax by:

• not keeping legally required books and documents
• not providing information, including tax returns and forms, when required to do so
• providing altered, false, incomplete or misleading information, including tax returns and forms
• not making a legally required deduction or withholding of tax.

It's also an offence to pretend to be another person for purposes relating to tax law.

The penalty for evasion offences is imprisonment for up to five years and/or a fine of up to $50,000.

Offences relating to court orders

We can seek a court order to obtain information necessary for fulfilling our statutory obligations. Anyone convicted of failing to comply with such a court order may be sentenced to imprisonment for up to three months, or fined up to $1,000.

Obstruction

Obstructing Inland Revenue in carrying out its lawful duties, or in exercising its lawful powers, is an offence.

The penalty on conviction for obstruction is up to:

• $25,000 for the first offence
• $50,000 for subsequent offences.

Aiding or abetting

It is an offence to aid or abet someone else to commit an offence.

Conviction will result in the same penalty as that for the person who committed the principal offence.

Employees and officers

An employee, agent or officer of a taxpayer commits an offence if they were responsible for that taxpayer committing an offence.

The employee will face a penalty if the principle offence was:

• caused by an action or omission of the employee, or with the employee's knowledge, or
• evasion committed by the employee.

If convicted, the employee will face the same maximum fine or term of imprisonment as the principal offender, the taxpayer.

For an employee to be convicted, Inland Revenue has to prove beyond reasonable doubt that the employee has knowingly or intentionally committed the offence. Obviously, a clerk who merely follows the instructions of a senior officer and doesn't know that a breach is being committed won't be penalised if the taxpayer is found to have committed an offence.

Date published: 30 Jun 2008

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