IRD visits reveal evasion and exploitation at small liquor stores

Some small liquor stores have surprised Inland Revenue officials with their non-compliance and other issues (Creative Commons Photo)

Venkat Raman
Auckland, June 21, 2024

The Inland Revenue Department (IRD) has released insights from its first round of a hidden economy campaign, focused on smaller liquor outlets in New Zealand.

The number of off-licence liquor stores has grown rapidly since 2020 and now accounts for about 3000.

In 2020 the data for these businesses placed the total sales at $1.95 billion, taxable profits at $34.7 million, income tax paid at $11.4 million and total GST collections at $29.4 million.

Signs of non-compliance

In the first stage of this campaign, compliance staff made 220 unannounced visits nationwide, looking for signs of issues such as income suppression, unreported sales, and non-registered staff. Most of the businesses visited had their tax affairs in order. The IRD officials also found businesses that did not have proper records.

Insights and Findings:  IRD officials said that they would like to learn more about this sector and improve voluntary compliance.

“We want to make sure liquor store owners are meeting their employee tax obligations. During the visits, we found more than 100 employees who had PAYE deducted from their wages but none of that had come to IRD,” they said.

IRD officials said that their visits have led to further investigation.

“We have started investigations because of our visits and nine outlets have been referred for audit. We are disappointed that these business owners appeared to be undermining other good businesses by not paying their fair share. Insights gained from the visits show there are migrant exploitation issues with under-the-table wages paid and the use of migrant/familial labourers who were not registered as workers. There was evidence of poor employee relations in some cases,” they said.

Violation of laws cited

IRD said that there There are high levels of unreported cash sales and poor record-keeping.

Other findings from the campaign included (a) Companies with multiple family members and changes of ownership demonstrated less clear money trails. (b) Some directors appeared to be name-only, with minimal knowledge of the business or their director responsibilities.

IRD officials described the campaign as a ‘light touch’ and that there was more to come.

“This is only the beginning of a wider look into smaller liquor stores nationwide and how they operate. More unannounced visits to businesses whose tax affairs may be out of order will be made as IR steps up its compliance work. To ensure there is a level playing field for all smaller liquor outlets, Inland Revenue will be closely watching these stores over the next 12 months,” they said.

Information to help business owners is available at Getting it right (ird.govt.nz)

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