Horticulture Sector In The Spotlight
Most people do the right thing and pay the right amount of tax, however in the past 10 months IR has found $45m of undeclared tax in the horticulture industry.
Tax an afterthought
Inland Revenue spokesperson Tony Morris says with some in the sector still recovering from the devastation of Cyclone Gabrielle, and dealing with increasing compliance costs and labour shortages, paying tax has often become an afterthought.
'Along with paying people under the table, IR is seeing cash sales not being reported correctly (including payments to contractors) and withholding tax not being deducted on schedular payments made, deducted at incorrect rates or not being reported to Inland Revenue,' Tony Morris says.
'While many growers are doing things right, they typically hire labour through a contracting firm, which then frequently pays the labourers in cash. Some of these contracting firms then use convoluted business structures to try and hide those payments.
'Not only does this mean they could avoid their tax, but it also means the labourers can get benefit payments they aren't entitled to or avoid their child support or student loan payments.
Audits and prosecutions
'Inland Revenue is cracking down on this by requiring many contracting firms to withhold tax from their labourers payments, and pay that directly to IR. Where Inland Revenue identifies growers and other payers not correctly deducting or accounting for the tax, we are also following these up.
'IR is also pursuing the contracting firms through audits and through prosecutions. There are nearly 100 such audits active at the moment.
Joint efforts
'With a high use of cash and migrant labour, the horticulture industry is also a sector open to abuse of workers. IR works with other New Zealand Government agencies to address these issues.
'Alongside Hort NZ and Zespri, we work hard to ensure growers and contracting firms are aware of what they need to do to get things right, and appreciate the efforts of the many who do get it right,' Tony Morris says.
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