Penalties in general: Overview

An introduction to penalties

The law clearly sets out the purpose of the tax penalties, which are:

• to encourage taxpayers to comply voluntarily with their tax obligations and to cooperate with us
• to ensure that penalties for breaches of tax obligations are imposed impartially and consistently
• to effectively sanction non-compliance with tax obligations at a level that is proportionate to the seriousness of the breach.

Failure to meet tax obligations may result in the imposition of civil penalties, criminal penalties, or both.

Penalties are not deductible for income tax purposes.

Civil penalties

A civil penalty is one that Inland Revenue imposes. The most common kinds of civil penalties are:

• late filing penalties
• non-electronic filing penalties
• late payment penalties
• shortfall penalties.

Criminal penalties

Criminal penalties are imposed by a court of law if you are convicted for not complying with the tax laws. Penalties can be imposed for the following offences:

• absolute liability offences
• knowledge offences
• evasion or similar offences
• offences in relation to court orders
• obstruction
• offences committed by employees and officers
• aiding or abetting another person to commit an offence.

Date published: 30 Aug 2006

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