We fully resumed all our compliance activities in December, while taking into account that not all customers or businesses are going through the same experience.
Our approach is to intervene before customers get it wrong, reducing the need for audits or investigations. Where possible, we‘ve worked with customers to avoid situations where they take an incorrect tax position that means they face a potentially significant tax bill.
However, we have continued to investigate and use enforcement where the risk to the integrity of the revenue system warrants it. Audits remain an essential part of our work and we use our new technology and greater access to third-party data to target the areas of greatest risk.
- A key investigation focus area this year was Small Business Cashflow Scheme loans, where we have rigorous procedures in place, beginning with validation checks by our systems and rigorous audits when needed. For example, one case had 8 entities associated with it, each receiving loans although none were trading. The loans were recalled and the loan applicant repaid the full amount.
- As at 30 June 2021, we have closed 49 audits of loan applications, with 224 audits still open. A dedicated team is also working on recovery of defaulted loans. 1,355 such cases had been opened as at 30 June. 789 customers were in default, with a value of $12.4 million.
It can be a stressful experience for business customers when we undertake an audit. We’ve improved this by reducing the time we take to complete a pre-audit review and an audit by an average of 14 days.
We've continued to review customers with complex structures or tax interpretation issues. These reviews resulted in tax position differences of $377 million. Whilst legal action is our last resort, when necessary, we prosecute.
We completed 50 prosecutions for tax evasion, knowledge and Crimes Act 1961 offences this year and had 97 prosecution cases before the courts at 30 June 2021.
Notably, 2 people committing major tax fraud were jailed in May 2021. One person was sentenced to 8 years and 6 months in jail after being found guilty of dishonestly claiming and receiving over $17 million of GST refunds over 4 years. The other was using horticultural companies to evade tax payments of over $1.7 million between 2007 and 2017. They received a 4-year jail sentence.
As well as people committing major tax fraud, we continued to take action on people who are not doing the right thing for Working for Families. In June 2021, a person was sentenced to 7 months of home detention after falsely claiming children were in their care and receiving $44,000 in Working for Families payments and over $102,000 in a tax write-off.
These sentences were a direct result of the determination and hard work of our compliance specialists and legal team, and embody our commitment to deal with people who deliberately defraud New Zealand’s revenue system.
- People made 695 voluntary disclosures related to property this year, worth $43 million, compared to 180 last year. This compares to 180 disclosures made in 2019-20.
- Customers made voluntary disclosures worth $37 million where they’d made incorrect GST refund claims.
- We closed approximately 16,140 audit cases, compared to 16,669 last year and 12,294 in 2018-19.
- Across all our investigations we identified tax position differences of $854 million.