IRD launches hidden economy campaign targeting the hospitality sector saying it will 'track down and prosecute businesses deliberately hiding cash sales'

IRD launches hidden economy campaign targeting the hospitality sector saying it will 'track down and prosecute businesses deliberately hiding cash sales'
Picture: IRD.

The Inland Revenue Department (IRD) is launching a hidden economy campaign targeting the hospitality sector including restaurants, cafés, bakeries, takeaway shops and liquor outlets.

IRD says hiding cash sales creates an uneven playing field and gives some a leg up at the expense of others. It says investigation work into the hidden economy uncovered $108.8 million worth of unpaid tax in 2018/19.

Here's the IRD's full announcement.

Tax evasion prison sentence a warning for hospitality sector

Recent successful court action against the owners of more than 20 Thai takeaway restaurants should serve as a warning that Inland Revenue will track down and prosecute businesses deliberately hiding cash sales – no matter how long it takes.

Five members of one family were sentenced this week after a multi-year tax evasion investigation. One was sent to prison for two years and 8 months and three will serve home detention sentences. The five were also ordered to pay a total of more than $2.2 million in reparations.

Inland Revenue has today launched a fresh hidden economy campaign targeting the hospitality sector which includes restaurants, cafés, bakeries, takeaway shops and liquor outlets. 

IR spokesperson Richard Philp says hiding cash sales creates an uneven playing field and gives some a leg up at the expense of others.

“What happened in the Thai House case was despicable. Cash sales were deliberately suppressed to pay less tax. An aggravating feature was that the declared income of two of the defendants was low enough to qualify for a Working for Families Tax Credit in some years.

“There was an extensive investigation into the family group with searches of private properties turning up business records, luxury goods and cash in some instances. At one point in the trial the cash deposited in personal bank accounts was said to be more than $9 million. 

“As these siblings found out, undeclared income leaves a trail which can be easily uncovered. Cash sales don’t fly under the IR radar and people who accept cash and don’t put it through the till should expect contact from IR.”

Investigation work into the hidden economy uncovered $108.8 million worth of unpaid tax in 2018/19.

“The hospitality sector has high risks when it comes to hidden economy activity and undeclared income because of the high number of cash transactions and the more short-term nature of employees,” Richard Philp says.

“We see things like staff being paid under the table and inconsistencies between supplies bought and goods sold. Cash leaves a clear trail for IR to follow. And we do follow through no matter how long it takes.

“If you’d rather sleep easy at night, keep good records and put cash sales through the till. Our best advice is to record everything, declare every dollar and make sure you’re charging GST if required.”

Richard Philp says most hospitality businesses are paying the right amount of tax and have good bookkeeping practices.

“But there are those that don’t. That’s a shame because knowing the books are all in good order takes a huge weight off a business owner’s shoulders. It not only helps with tax obligations but also provides a more accurate view of cash flow, allows greater access to finance and ensures a business is correctly valued.

“There are software packages on the market to help businesses of any size to log income and expenses – and the purchase of them is tax deductible. Even a simple spreadsheet is better than no records and can work just as well.

“All taxpayers play an important role in helping us protect the integrity of the tax system by making sure everyone pays their fair share. Afterall, tax pays for the essential things that make New Zealand a great place to live,” Richard Philp says.

If you think someone’s not being honest about their tax you can anonymously report tax evasion https://www.classic.ird.govt.nz/tax-crime/report/report-tax-evasion.html

You can contact Inland Revenue if you think hospitality businesses are not declaring their full earnings hospitality@ird.govt.nz.

Or, as a business owner, you can also tell IR voluntarily about your own tax situation especially if you think there’s something wrong with your tax returns because you’ve left out some cash sales https://www.ird.govt.nz/tasks/make-a-voluntary-disclosure

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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this has been going on for ages,
I remember the old days buying the morning paper and the dairy owner gave you change from on top of the till, the sales never went through the till

Last year commented on the open till practices at the Albany Mall food hall. When I asked for a receipt the young Asian girl couldn't do it and mamasan had to come out to do it. She wasn't happy.

Yes, it has. I remember telling people about dodgy practices at a local bakery some years ago and nobody seemed to care. "Oh well, I expect they're all doing it" or "They work hard so don't begrudge them a few undeclared cash sales", were what people said.

14
up

'Restaurants, cafés, bakeries, takeaway shops and liquor outlets'. Looks like a list of sectors requiring the rarely available and desperately needed skills of tens of thousands of carefully selected immigrants.

It's a great rort if you can:

1. Whine to the government that you need to be able to import cheap, exploitable workers,
2. Avoid paying tax while living well off the back of these workers, enjoy the services New Zealand society provides, and
3. Declare such a low income that all the suckers on PAYE subsidise your lifestyle.

Craziness.

I doubt that owners of these businesses have any ability to force government into anything. The cheap labour is mainly imported by big guys like owners of Burger King, McDonald, Domio and Pizza Hutt etc. These businesses have the required resources and political beef to influence immigration decisions.

Many of them contribute as members of the Restaurant Association of NZ, whose CEO was then lobbying the government to let members import more and more workers.

With disposable income tanking and many restaurants and cafes barely treading water, this will help to accelerate the closure of dozens of them, if not hundreds, in the years ahead.

Only if they are not being honest at the moment. And if that is the case are you saying that they should be allowed to continue breaking the law just so that they can stay in business???? But hey, that is the sort of argument that this very foolish government listens to.

Include the corner dairy sector also. Hang around the checkouts at Pak and Save and note who is paying cash.
They also need to be having a very close look at the Hospitality sector and check for laundering drug money. As a mental exercise, consider what some of the real-estate on Tamaki drive is worth, the rentals for restaurants to support those values and how many customers and turn over required to to pay that rental? Did it once. It doesn't add up.
Heard a good one from Italy.
Police were stopping the drivers of super cars and asking how much tax they paid last year.
We could do the same here by cross checking the car ownership records with the tax records
Or cross check the property title records with the tax records.

These hard working immigrant business owners have the wrong business model. They should bet setting up Double Irish Dutch Sandwich shops. No tax worries then.

One staff (family) member on payroll, the remainder on a benefit. That’s the model of a rockstar economy.

I am calling beat up.

Saying cash bad, in so far as all money needs be digital and safety accounted for in negative interest rates.

Sounds like tax was the last thing these guys got fingered for!.
And no mention of the scale supporting professional advisors or bankers.

I agree. As most govts are struggling to fund all of the promises that cannot be kept, the hunt for taxes will only ramp up. Much like the Aussie govt war against cash, with billboards proclaiming "cash is for criminals", this is another assault on our freedom whereby they want total control and nothing that cannot be tracked. The sheeple will applaud this and accept what is coming to them, because govt is here to help us and make a better society...yeah, sure.

In the IRD statement they keep saying that they can track cash. I've got to wonder what they're talking about there. They could do detective work on a target if they wanted, and work it out, but in general, surely cash transactions do in fact fly 'under the radar'.

Running my eyes over the 'hospitality' sector I see it has changed enormously in the last decade. Particularly during the era of Nationals superb managerial approach to running the economy when they let entire criminal organisations into the country under the guise of business owner/investor visa category. There are virtually no NZers involved in bakehouse type businesses or liquor stores, they are all owned by opportunist fraudsters who have proven to be a disaster for the economy due to worker exploitation, tax fraud and importing illegal alcohol and foodstuffs. Wait till we get the first deaths from doctored alcohol as happens in India and Sri Lanka and you'll see what I mean... Get the feeling you've lost control of your country New Zealand?