Penalties and interest: Shortfall penalties
Evasion
Tax evasion may involve:
- evading the assessment or payment of tax, on your own or another's behalf
- using deducted or withheld tax for anything other than its lawful purpose
- knowingly failing to make a legally required deduction or withholding tax
- knowingly obtaining a refund or payment of tax when you aren't lawfully entitled to that refund or payment
- enabling someone else to obtain a refund or payment of tax, knowing that the other person isn't entitled to this payment or refund
The penalty for evasion or a similar act is 150% of the resulting tax shortfall.
| Note | |
|---|---|
| If we charge a non-payment penalty on an employer monthly schedule period, a shortfall penalty for evasion will not be charged on this period. | |
Before imposing the evasion shortfall penalty, we may consider prosecuting for evasion. In such cases the penalty can be imprisonment for up to five years and/or a fine of up to $50,000.
| Example | |
|---|---|
| Kim's beauty therapy business needs new furniture for its reception area. Kim also intends to replace her lounge suite at home. Kim arranges with her supplier to invoice all of the furniture, including that meant for her home, to the beauty therapy business. Kim falsifies details on the invoices to show the delivery details to be her business premises so she can claim GST on it. Kim has deliberately tried to claim a GST credit that she isn't entitled to and it attracts a penalty of 150% of the tax shortfall. Before imposing the shortfall penalty we would consider prosecuting Kim for knowingly providing false information to evade tax. | |
The responsibility of employees
An employee, acting on behalf of their employer, may be subject to a penalty if they knowingly fail to deduct or withhold tax for their employer, or use it for anything other than payment to Inland Revenue. In practice, a senior employee who issues an order to do this may be held accountable.
Date published: 26 Mar 2008
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