Not a Cashflow Crisis: Skipping Tax Landed Business Owner Behind Bars
A Christchurch businessman was sentenced to two years and three months in prison last week for $1.4 million in unpaid PAYE and GST.
The bit that really stands out the most: the money was in the bank, he just chose not to pay it. Normally this only happens when businesses have no other cashflow choice to stay afloat, not this time. Paid wages, paid creditors, paid for home renovations, transferred money for his personal living expenses. The IRD got paid last, or never.
That's not a cashflow problem, it's a decision. It's tax evasion (that's the one that's worse than avoidance, where you get a slap on the wrist and a fine).
The IRD's own words: using tax as working capital gave him an unlawful competitive and lifestyle advantage over businesses that paid their tax on time. That framing matters as one of the key focuses of the IRD is on the integrity of the tax system as a fair playing field in the NZ economy. Every business that operates this way is essentially trading on borrowed money that belongs to the government and undercutting every honest competitor that plays by the rules.
With the businesses we see in real trouble right now, the pattern is always the same. The Tax Man goes unpaid first because it feels like the most flexible creditor, the easiest 'overdraft'. Then the tax payment arrangements get set up. Then the payment arrangements default. The problem compounds till the IRD starts paying really close attention.
The IRD will work with you if you get there first and engage honestly. What they will not do is ignore it forever. And they definitely won't tolerate an abusive tax position.
PAYE and GST aren't your money, they aren't there for cashflow or kitchen reno's. Budget accordingly.
Originally posted by ATAINZ member, Chris Mercer, on LinkedIn.
