You probably know that most income is taxable.
If you earn a salary or a wage, your employer will deduct the tax every payday.
If you work for yourself, you must file an annual income tax return with Inland Revenue Department (IRD) and pay tax on your net profit.
But what about the work you do in addition to your day job? Are you keeping a record of it for IRD? The tax laws require you to pay tax on all your income; even income you earn from one-off cash jobs or from work you do outside business hours.
Why pay tax?
The Government uses our taxes to pay for important services like schools, hospitals, roads, and policing – services that benefit the whole community. If someone pays less tax than they should, everyone misses out.
The defaulters
Businesses evading tax are causing unfair competition, because they can undercut businesses that are playing by the rules.
Tax evasion is far from a ‘victimless crime.’
People who underpay their tax are putting themselves at a disadvantage too. If you do not record all your income in your accounting system, you may find it harder to raise finance to sell your business for its true value or get full accident compensation if you are injured and off work.
Hidden economy
What is IRD doing about the ‘hidden economy?’
We believe that it is important for people to get it right from the start. Over the past two years, we have released our Compliance Focus Document to make areas of concern very clear and assist people to meet their obligations. The Document can be found at www.ird.govt.nz (keywords: compliance focus).
You will realise that the hidden economy is one of the areas of our focus.
We are increasing our community presence and providing more preventative assistance. Our Community Compliance staff offer free tax seminars and workshops to help people with their tax responsibilities. You can register online by visiting our website.
Punitive measures
Where we detect serious, deliberate and persistent non-compliance, we will take firm action to investigate, assess and recover the unpaid taxes and impose appropriate sanctions, which can include substantial penalties and criminal prosecution.
Our investigators are trained to identify tax evasion and calculate the amount of tax evaded, even in cases where no records have been kept.
Have you made a mistake?
If you have filed an incorrect tax return, the best thing to do is to contact us before we find out in some other way. This is called ‘Voluntary Disclosure, the advantages of which have been outlined in our guide, ‘Putting your Tax Returns Right’ (IR 280).
Free Workshops
If you are in business, you may like to attend one of our free tax seminars or workshops held in various parts of the country. Please visit our website for details.
Abdul Rafik is Inland Revenue’s Community Compliance Officer based in Auckland. He will answer your queries emailed to venkat@indiannewslink.co.nz
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