At their most serious, tax crimes are prosecuted as fraud. Even non-filing of a return can be treated by the IRD as evidence of intent to evade taxes. Serious tax crime involves the real risk of prison and/or fines. If you have not disclosed your default to the IRD and it prosecutes you, an effective defence or mitigation is vital.
If the IRD considers that you or your client has committed an offence, it must consider whether to prosecute or not. There are a large number of offences created in the Tax Administration Act 1994 and in more serious cases the IRD will also prosecute using the Crimes Act 1961.
There is a misconception that tax offences are not treated with the same seriousness as other offences of fraud or dishonesty, and that tax offences are somehow “victimless” crimes. That is incorrect. A conviction for tax evasion can carry the very distinct risk of imprisonment as well as hefty fines. It is noteworthy that the coalition agreement between Labour and New Zealand First provides for an increase in penalties for corporate fraud and tax evasion.
Not all offences are equally serious and the IRD has a discretion as to how it will charge a person. Sometimes it is possible to suggest that lesser charges should be laid as part of a settlement. In such cases charges can be applied which do not run the risk of imprisonment.
If tax charges are laid, you need to be able to decide reasonably quickly what plea will be entered. This will be affected by the summary of facts provided by the prosecution and by the documentary evidence which it must supply by way of disclosure. It is unwise to plead to an offence until you or your lawyer have been able to review the disclosure materials.
In many cases a person charged with tax offences will have the right to choose between a jury trial and a trial before a Judge alone. That decision can be a very important one and will be affected by a whole range of factors such as the taxpayer’s likely performance as a witness and how a jury might react to someone not paying their taxes as they should have.
Even if a not-guilty plea is entered, it is possible to obtain a sentencing indication from a Judge at a status hearing so that you have some idea of what the penalty would be if the plea is changed to guilty.
If a not-guilty plea is maintained, the matter will be allocated a trial fixture. Criminal prosecutions are often very time consuming. It is not unusual for a defended prosecution to last for a week or more. Most tax prosecutions occur in the District Court, although in very serious cases the Crown may seek a trial in the High Court.
Geoff Clews is a skilled tax defence counsel who can lead or contribute to an effective defence of tax charges.
To find answers to frequently asked questions about tax prosecutions, click here.
To contact us for help with a tax prosecution, click here.