I’m more Columbus Coffee or Burger Fuel, depending on the time of day. Still, I’d wasted a few afternoons al-fresco dining at SPQR when someone else was picking up the tab, which in theory contained a 15% allocation for GST. Yet it seems the Commissioner didn’t always get his cut.
SPQR went into liquidation owing over a million in unpaid GST and PAYE, racked up over several years. At some point the SPQR director, like Bilbo Baggins, looked at the money set aside to pay the tax and asked; “Why shouldn’t I keep it?”
OK. That isn’t how it works. Usually the company has had a tight month and faced with paying the wages or tax, they pay the wages. I know, because in a past life I found myself in the same bind and made that decision. Liquidation ensued.
Those that can, do. Those that can’t become insolvency practitioners. Back to Ponsonby Road.
While SPQR was short paying, I estimate, $30,000 a month, nearby restaurants were meeting their obligations. And this is the real cost; honest firms competing with others who do not care as much and, consequently, some become non-complaint themselves.
Now, I think tax is theft and should be abolished, but if we have to live in this sub-optimal system we should at least make a minimal effort to enforce our own laws.
Eventually the Revenue took action and the director fell on his gladius and appointed a liquidator of his choice rather than have one imposed on him by the IRD through the court. Faced with other debts, the director fell into bankruptcy.
The IRD is sitting on 9.3 billion in tax arrears. $6.2 billion of that is core tax, the balance interest and penalties. That number would be higher but about 800 million is written off annually.
OK. That isn’t how it works. Usually the company has had a tight month and faced with paying the wages or tax, they pay the wages. I know, because in a past life I found myself in the same bind and made that decision. Liquidation ensued.
Those that can, do. Those that can’t become insolvency practitioners. Back to Ponsonby Road.
While SPQR was short paying, I estimate, $30,000 a month, nearby restaurants were meeting their obligations. And this is the real cost; honest firms competing with others who do not care as much and, consequently, some become non-complaint themselves.
Now, I think tax is theft and should be abolished, but if we have to live in this sub-optimal system we should at least make a minimal effort to enforce our own laws.
Eventually the Revenue took action and the director fell on his gladius and appointed a liquidator of his choice rather than have one imposed on him by the IRD through the court. Faced with other debts, the director fell into bankruptcy.
The IRD is sitting on 9.3 billion in tax arrears. $6.2 billion of that is core tax, the balance interest and penalties. That number would be higher but about 800 million is written off annually.
Click graph to view - Tax and entitlements debt, penalties and interest and write offs from June 2015 to June 2025. Photo: Supplied
The IRD is notoriously tardy in enforcement but eventually does force companies with arrears into liquidation through a court process. The current system is broken.
The IRD is notoriously tardy in enforcement but eventually does force companies with arrears into liquidation through a court process. The current system is broken.
Over a decade ago the IRD had a wide panel of private insolvency firms (not including mine; we were just as controversial then) who would manage these liquidated companies. The process worked so the IRD decided to improve matters and held a tender. Surprising no one, including themselves, three large international accounting firms got the business.
One has since quit and the two left standing now take a fraction of the IRD’s work; so the IRD funnels a massive tranche of files to the Official Assignee.
This is the insolvency equivalent of state care for children and it works about as well. The Official Assignee handles liquidations no one else wants, bankruptcies and the proceeds of crime. Reading the annual report, it appears that they paid just under nine million in distributions for all estates last year.
This small team has been swamped; 58 liquidations in 2019 to 586 last year.
I should confess a conflict. I’ve tried to get my grubby mittens into this trough without success. As one senior IRD staffer told me, no one at the Commissioner who values their paycheck will ever sign off letting a self-promoting ex-con with a libertarian world view and questionable personal hygiene anywhere near their failed clients.
I respect that.
One has since quit and the two left standing now take a fraction of the IRD’s work; so the IRD funnels a massive tranche of files to the Official Assignee.
This is the insolvency equivalent of state care for children and it works about as well. The Official Assignee handles liquidations no one else wants, bankruptcies and the proceeds of crime. Reading the annual report, it appears that they paid just under nine million in distributions for all estates last year.
This small team has been swamped; 58 liquidations in 2019 to 586 last year.
I should confess a conflict. I’ve tried to get my grubby mittens into this trough without success. As one senior IRD staffer told me, no one at the Commissioner who values their paycheck will ever sign off letting a self-promoting ex-con with a libertarian world view and questionable personal hygiene anywhere near their failed clients.
I respect that.
“The IRD is sitting on 9.3 billion in tax arrears.”. Photo: Mark Jephson / WAIKATO TIMES
While senior bureaucrats protect their sinecures 88% of companies that go into liquidation have tax debt and in the 2024 year $1.26 billion was owing by liquidated firms.
Now is a good time mention being a director of a company and not paying over PAYE is a criminal offence with up to five years in prison as a consequence and the IRD is in charge of prosecutions. In theory.
Last year they opened 50 prosecutions and most of those were for fraud and tax evasion; not the non-compliance known as Knowledge Offences in the legislation. By my research, you have one chance in four hundred of being prosecuted if your company does not pay its PAYE obligations.
Although the risks, if you do get pinged, can be serious. Last year a Christchurch director got thirty months’ prison failing to account for $1.6 million in PAYE. Going well he should do a third of that. I mean, I did longer for less so the risk return matrix is attractive.
This is an easily corrected problem. It does not require new laws or fresh capital. Only that the Commissioner’s staff perform the basic level of competence and insist that firms pay what they owe, liquidate promptly those who do not, and hold to account directors who profit from persistent breaches......The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective
While senior bureaucrats protect their sinecures 88% of companies that go into liquidation have tax debt and in the 2024 year $1.26 billion was owing by liquidated firms.
Now is a good time mention being a director of a company and not paying over PAYE is a criminal offence with up to five years in prison as a consequence and the IRD is in charge of prosecutions. In theory.
Last year they opened 50 prosecutions and most of those were for fraud and tax evasion; not the non-compliance known as Knowledge Offences in the legislation. By my research, you have one chance in four hundred of being prosecuted if your company does not pay its PAYE obligations.
Although the risks, if you do get pinged, can be serious. Last year a Christchurch director got thirty months’ prison failing to account for $1.6 million in PAYE. Going well he should do a third of that. I mean, I did longer for less so the risk return matrix is attractive.
This is an easily corrected problem. It does not require new laws or fresh capital. Only that the Commissioner’s staff perform the basic level of competence and insist that firms pay what they owe, liquidate promptly those who do not, and hold to account directors who profit from persistent breaches......The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective
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