An Auckland man has become the first person in New Zealand to be convicted and sentenced for aiding and abetting his company's possession of electronic sales suppression tools (ESST).
In response to the growing threat of these digital tools, stiff measures were introduced in April 2022 and made it an offence to acquire or possess ESST in New Zealand.
Gurwinder Singh was sentenced in the Manukau District Court on 15 July to seven months home detention on tax evasion charges and a charge of aiding and abetting his company for possessing electronic sales suppression tools for the purpose of evading the assessment and payment of tax.
The Judge ordered the start date of the sentence be deferred until 20 August to allow Singh to travel to Fiji for family funerals.
The investigation
Singh runs a pizza outlet, Just Pizza, in Waiuku.
As part of an Inland Revenue (IR) investigation searches were carried out at his home and business addresses, and bank records obtained.
During an interview, Singh admitted he was hiding income from his tax agent so that he didn’t have to pay so much tax.
Ex-employees confirmed the pizza business employed 4 staff including Singh, but PAYE returns indicated only 2 staff.
Calculated offending
Singh’s offending was planned, calculated and required ongoing financial manipulation.
The total GST discrepancy from the offending is $78,777.09; income tax discrepancy is nearly $100,000; and the PAYE discrepancy is $21,337 – a total of just over $198,500.
Effect on the tax system
The threat that ESST pose to the integrity of the tax system is significant and IR has an obligation to honest businesses to stamp out its use.
There’s no other purpose to ESST other than to facilitate tax evasion or money laundering. They’re being used globally to systematically alter point-of-sale data collected to understate or completely conceal revenue to evade tax.
ESST work by targeting the integrity of transactions, software, internal memory, external filing, or reporting to delete, change, or simply not record selected sales data and transactions.
Background
A civil penalty and two new offences were introduced in 2022 in relation to involvement with ESS tools:
• New section 141EE establishes the ESS penalty of $5,000 for the acquisition or possession of a suppression tool.
• New section 143BB establishes an offence of manufacturing or supplying a suppression tool. A person convicted of such an offence is liable to a fine of up to $250,000.
• New section 143BC establishes an offence of acquiring or possessing a suppression tool. A person convicted of such an offence is liable to a fine of up to $50,000.
Related media releases
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Tax evasion software prompts stern warning
Inland Revenue has issued a new Revenue Alert warning of severe consequences for anyone who has or uses Electronic Suppression Software Tools (ESST) to try to evade tax.