First they came for the partners of beneficiary fraudsters, and I was silent. Then they came for the professional advisors of corporate entities, and I thought "hang on - this is completely ridiculous!"
Minister of Revenue, Peter Dunne, has today announced new measures to prevent, detect and catch corporate tax evasion.
“We know that the vast majority of corporate tax payers are honest and do the right thing, but a small minority take advantage of the tax system. Let’s be clear – tax evasion is a crime, committed by criminals, for their own benefit at the taxpayer’s expense, and we treat it as such without excuse,” says Mr Dunne.
“This Government promised to clamp down on tax evasion, and I’m pleased to deliver on that promise today.”
The first initiative is to amend the law to create a new offence targeting professional advisors of corporate entities who are convicted of tax evasion.
“Currently there are few options available to prosecute professional advisors who know or benefit from such offending, leaving the entire debt with the corporate entity,” says Mr Dunne.
“Prosecuting professional advisors who profit from tax evasion committed by their corporate clients will ensure that all parties who profit from the crime are punished, and will help the taxpayer recover the lost money faster.”
Tax evasion last year cost tax payers between $1 and $6 billion, yet those convicted of such offending were far less likely to be imprisoned for their offending than individuals convicted for benefit fraud.
"The new measures this Government will introduce help drive home the message that tax evasion is a crime, and that all those who know of and benefit from it will be held fully to account," says Mr Dunne.
Under the new offence, any professional advisor providing services for a fee who learns that her or his corporate client is engaged in practices that amount to tax evasion must immediately cease providing such advice, or else report the corporate entity's actions to the IRD. A failure to do so will attract a potential jail sentence of up to 1 year in prison and a fine of $5000.
In addition, the law will be changed to expand the IRD’s ability to seize assets owned or jointly owned by a professional advisor under the Criminal Proceeds (Recovery) Act 2009, and to recover some of the tax debt and associated penalties from the professional advisor who has benefited from the fraud.
The President of the New Zealand Law Society, Johnathan Temm, welcomed the Government's announcement.
"In too many cases, lawyers and other professional advisors are pressured into giving advice for a very substantial hourly fee to corporate clients we know to be acting in breach of the law, yet are constrained by our code of ethics to remain silent. Then, if the client's actions are detected and prosecuted, the advisor is able to walk away without any liability," says Mr Temm.
"Any law change that permits us to refuse to give advice to such wrongdoers in spite of the forgone fees, and that punishes those lawyers who continue to do so knowing of the criminal activities of their clients, will help restore some equity into the relationship and recognise that both parties have responsibility for the offending."
The Government proposes introducing these measures by way of legislation as soon as ERMA gives the green light to research crossing the genes of pigs and white herons, with the aim of creating porcine aviators.