TAX NEWS - June 2010

New Zealand Tax: Takeaway Owner Gets Home Detention For Tax Evasion

A Wellington man has been sentenced to eight months home detention after pleading guilty to 26 charges of tax evasion and obtaining payments he was not entitled to totalling $158,194.

Yong Rong Zhi, the former owner of Alasia Seafoods in Miramar and current owner of Go Fish in Petone, was sentenced today in the Wellington District Court. He was convicted on 18 charges of providing false information to evade GST, four charges of evading income tax, and four charges of providing false information to obtain payments.

"Businesses of this type, that report low profits and low profit margins, are likely to be targeted for investigation by Inland Revenue. Yong Rong Zhi deliberately set out to try and cheat the tax system by suppressing income he received from his business. Those that evade tax will face the consequences of those decisions," said Patrick Goggin, Assurance Manager, Investigations.

"Our tax system relies on the honesty of taxpayers, and when someone isn't paying their share they're taking money from services like schools and hospitals," Mr Goggin said.

In 2001, Zhi started his first takeaway Alasia Seafoods when he purchased an existing shop in Miramar. Over five years the business returned very low profits.

Despite the low returns, he was able to purchase the business outright. In addition to buying the business he was also able to purchase the property in which the business was housed, before later selling the takeaway business and the property separately at substantial profits.

Between 2003 and 2006 the total amount of income tax that Zhi evaded was $99,052. During this period he also evaded $43,555 of GST and unlawfully obtained $15,585 of Working for Families Tax Credits.

The case is one of a series of investigations by Inland Revenue into the hospitality industry.

"We will continue to target the hospitality industry. I'd urge business owners to come forward and voluntarily disclose any understatement of income," Mr Goggin said.