IRD targets hospitality tax dodgers

Queenstown’s thriving hospitality scene provides the perfect environment for tax dodgers, industry insiders say after an Inland Revenue raid.

Staff visited more than 40 Queenstown cafes, restaurants and bars as part of a campaign to uncover tax evasion in the hospitality sector. Inland Revenue spokesman Richard Philp said the visits confirmed the sector had a high risk of cash sales not being reported and employees being paid under the table.

Hospitality NZ Central Otago president Chris Buckley said he was not surprised the tourist town had been targeted.

Strong competition for business, staff and housing shortages and itinerant workers was behind some businesses trying to cheat the system, he said.

Queenstown was ‘‘an easy target’’ but it was the same in other parts of New Zealand, he said.

One issue was business owners swapping work for accommodation. ‘‘If you’re a small business it’s really tough out there at the moment, especially with Immigration NZ.

‘‘It’s like there’s one department setting you up to fail and the other waiting with a big stick.’’

Queenstown Lakes District Councillor and former hotelier Penny Clark said she was appalled to hear some Queenstown businesses might be cheating the tax system. ‘‘Why do people think they can get away with it? It’s mind boggling.’’

Philp said staff used courtissued warrants to seize wage records, computers and business records. Information on employer-provided accommodation, rental properties, working for Families Tax credits and payroll matters was also collected.

It included details of staff paid in cash without PAYE deducted and cash deposits to private bank accounts without being returned for GST and tax payments.

Philp said three high-risk businesses were searched under warrant and six received unannounced visits. A further 32 considered ‘‘medium to low risk’’ were reminded of the Inland Revenue’s ‘‘Sleep Easy’’ campaign, which encourages them to keep good business records.

Two businesses were considering making voluntary disclosures, he said. Informing the department of any tax shortfalls can reduce the penalties.

The campaign followed the organisation’s prosecution of five siblings for a $2.3 million tax evasion. They ran the nationwide Thai House Restaurant chain.

Following the prosecution Inland Revenue announced the campaign targeting the reporting of cash sales. The organisation has yet to analyse the Queenstown information and decide whether to prosecute.