Cash jobs: Will you pay cash to people for odd jobs and thus help them avoid tax?

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Forums › Finance and wealth management › Cash jobs: Will you pay cash to people for odd jobs and thus help them avoid tax?

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#2139950 5-Dec-2018 15:39

macuser:
IRD doesn't care about cashies because

A) They cost too much to research and enforce

B) That money will likely be taxed somewhere else in the chain (for example, retail spending of the money acquired by cashies) - unlike international corporations who move all of their non taxed revenue offshore - with no chance of any of it being taxed down the chain.

I don't think that is true. The IRD has been running a campaign to track down the "black economy".

"Cash payments will always leave a trail, Inland Revenue says" https://www.stuff.co.nz/business/100078541/cash-payments-will-always-leave-a-trail-inland-revenue-says

"In its most recent annual report, Inland Revenue noted that it had found $159 million in "tax position differences" in the 2017 year." That must be a reasonable rate of return on the cost of investigation as the Govt. has allocated about another $80M

eracode

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#2139954 5-Dec-2018 15:47

Batman:
macuser:

This might be a good link to share... How many of us give thousands to these business' who pay ZERO or close to zero tax due to creative accounting.

Apple pays zero tax in NZ despite sales of $4.2 billion

Click here if you want to see the Tax other companies pay vs their revenue

IRD doesn't care about cashies because

A) They cost too much to research and enforce

B) That money will likely be taxed somewhere else in the chain (for example, retail spending of the money acquired by cashies) - unlike international corporations who move all of their non taxed revenue offshore - with no chance of any of it being taxed down the chain.

Ah yes, the big elephant in the room.

Also the other big elephant of all the wasted tax payer money ... for example, I pay rates and so do you.

Our street was dug up and resealed no less than 5 times in 2 years.

1 - to install some pipes - took about 1 month

2 - exactly 2 months later to fix stormwater drains - asked why they didn't do both at same time, was told they didn't think about it

this took about 9 months to complete. 9 months of full time paid work where every day people are actually paid to be around (doing what i don't know)

3 - exactly 1 month after that they dug it up again. i later discovered that they had did something incorrectly.

4 - 1 year later they dug it up because the "road has failed"

5 - signs are going up 1 year later for some work but I don't know what yet

all the poor planning but you know why? because they have your money. they have your money and they must spend it somehow, otherwise the budget will be cut next year, so just spend it. and if you get lucky and spend way too much you get more budgeted next time round.

(PS i feel for the teachers who see uni students getting drunk for free, and the american's cup getting money for free while they slog day and night just to be abused by spoilt kids)

Your whole post here is totally OT.

Sometimes I just sit and think. Other times I just sit.

kingjj

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#2139957 5-Dec-2018 15:52

Bung:
macuser:

IRD doesn't care about cashies because

A) They cost too much to research and enforce

B) That money will likely be taxed somewhere else in the chain (for example, retail spending of the money acquired by cashies) - unlike international corporations who move all of their non taxed revenue offshore - with no chance of any of it being taxed down the chain.

I don't think that is true. The IRD has been running a campaign to track down the "black economy".

"Cash payments will always leave a trail, Inland Revenue says" https://www.stuff.co.nz/business/100078541/cash-payments-will-always-leave-a-trail-inland-revenue-says

"In its most recent annual report, Inland Revenue noted that it had found $159 million in "tax position differences" in the 2017 year." That must be a reasonable rate of return on the cost of investigation as the Govt. has allocated about another $80M

My brother works for the IRD as a data scientist and this is one of his teams current tasks. It's certainly something the IRD are ramping up on.

Tzoi

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#2139959 5-Dec-2018 15:57

Definitely not true that IRD don't care about cash jobs. Also dobbing in people to IRD does work - I know of situations where IRD has investigated based on that sort of thing.

frednz

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#2140004 5-Dec-2018 16:46

Bung:
macuser:

IRD doesn't care about cashies because

A) They cost too much to research and enforce

B) That money will likely be taxed somewhere else in the chain (for example, retail spending of the money acquired by cashies) - unlike international corporations who move all of their non taxed revenue offshore - with no chance of any of it being taxed down the chain.

I don't think that is true. The IRD has been running a campaign to track down the "black economy".

"Cash payments will always leave a trail, Inland Revenue says" https://www.stuff.co.nz/business/100078541/cash-payments-will-always-leave-a-trail-inland-revenue-says

"In its most recent annual report, Inland Revenue noted that it had found $159 million in "tax position differences" in the 2017 year." That must be a reasonable rate of return on the cost of investigation as the Govt. has allocated about another $80M

Good research, thanks for the link to that article. It mentions that:

Someone receiving cash payments might come to the department's attention in a few ways:

Someone might dob them in - there is a link on Inland Revenue's website to do this confidentially.
Someone they traded with my disclose the transaction in their own tax returns.
An audit of one person might indicate another business or contractor needed to be audited.
The Inland Revenue might decide to focus on participants in an "at risk" industry, and perform random audits to check their compliance.

Inland Revenue investigations and advice manager Tony Morris said every cash job would leave a trail.

"With cash, you have to spend it some time. So whether it goes on travel, living expenses, a new skill saw, gambling, the mortgage or anything else, we can find it."

People might put payments into a family member's account instead, so they did not have unexplained payments into the business account. But he said that would be traceable.

That's fairly sobering stuff for the tradies etc who think that a cash-only business will never have to pay tax! Ouch, whatever you do, the IRD can find it!

mattwnz

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#2140010 5-Dec-2018 17:09

IMO everyone should pay their fair share of taxes. If everyone did, including these big overseas companies, then we may not have the same need for charities, and funding shortfalls with health and education etc. You get all these people who also say that we can't afford to keep the super at 65, and it needs to go up to 70 and be means tested, but if the government were getting more tax in, then there would be more money to pay for these things. The other problem with paying cash, is that you are likely to have minimal comeback if the job is bad without a receipt.

tdgeek

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#2140012 5-Dec-2018 17:12

The short story is they will audit your incomings and outgoings. You may live a good lifestyle yet your business has a low income. That leaves a hole. Show me the receipt for this car you changed to your name 8 months ago. How can you live in this income?? And so on

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Rikkitic

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#2140013 5-Dec-2018 17:15

frednz:

Someone receiving cash payments might come to the department's attention in a few ways:

Someone might dob them in - there is a link on Inland Revenue's website to do this confidentially.
Someone they traded with my disclose the transaction in their own tax returns.
An audit of one person might indicate another business or contractor needed to be audited.
The Inland Revenue might decide to focus on participants in an "at risk" industry, and perform random audits to check their compliance.
Inland Revenue investigations and advice manager Tony Morris said every cash job would leave a trail.

"With cash, you have to spend it some time. So whether it goes on travel, living expenses, a new skill saw, gambling, the mortgage or anything else, we can find it."

People might put payments into a family member's account instead, so they did not have unexplained payments into the business account. But he said that would be traceable.

That's fairly sobering stuff for the tradies etc who think that a cash-only business will never have to pay tax! Ouch, whatever you do, the IRD can find it!

This sounds a lot to me like the mythical detector vans that were supposed to catch out those who didn't pay TV license fees. If cash trails are so easy for IRD to follow, there shouldn't be any drug dealers doing business, for one thing.

Plesse igmore amd axxept applogies in adbance fir anu typos

FineWine

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#2140014 5-Dec-2018 17:18

Batman:

Ah yes, the big elephant in the room.

Also the other big elephant of all the wasted tax payer money ... for example, I pay rates and so do you.

Our street was dug up and resealed no less than 5 times in 2 years.

1 - to install some pipes - took about 1 month

2 - exactly 2 months later to fix storm-water drains - asked why they didn't do both at same time, was told they didn't think about it

this took about 9 months to complete. 9 months of full time paid work where every day people are actually paid to be around (doing what i don't know)

3 - exactly 1 month after that they dug it up again. i later discovered that they had did something incorrectly.

4 - 1 year later they dug it up because the "road has failed"

5 - signs are going up 1 year later for some work but I don't know what yet

all the poor planning but you know why? because they have your money. they have your money and they must spend it somehow, otherwise the budget will be cut next year, so just spend it. and if you get lucky and spend way too much you get more budgeted next time round.

(PS i feel for the teachers who see uni students getting drunk for free, and the American's cup getting money for free while they slog day and night just to be abused by spoilt kids)

Ah YES - see this time and time again and it is usually your local council. Poor planning and departments and local municipalities not talking to each other. Gas, Electricity, UFB, Spark, Water, Road & Footpath. Especially for major works projects (not repairs) all, I presume, are meant to go through council planning. A joke really and our rates.

Council and Planning = expensive contradiction in terms

Sorry for hijacking thread

Whilst the difficult we can do immediately, the impossible takes a bit longer. However, miracles you will have to wait for.

wsnz

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#2140039 5-Dec-2018 19:05

mattwnz:

IMO everyone should pay their fair share of taxes. If everyone did, including these big overseas companies, then we may not have the same need for charities, and funding shortfalls with health and education etc. Y

Define "fair share", then define "shortfalls in funding". That's where the problem begins, because it's all a subjective measure as to what the governing party believes is necessary, rather than an objective fact.

The issue in providing a definition provides an avenue for an individual to justify their behaviour from a moral perspective.

Some are clearly pushing the limits though, such as the builder who completed a $40K CASH job.

Geektastic

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#2140045 5-Dec-2018 19:13

I might posit that if people who habitually pay taxes are feeling the need to find ways to pay less, it is possibly because so few people in NZ as a percentage are actually net income tax payers. There is a pretty small number of people being expected to carry a disproportionately large chunk of the load.

In places where taxes are perceived as fair and reasonable, avoidance tends to be far less of a problem.

mattwnz

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#2140062 5-Dec-2018 19:20

wsnz:

mattwnz:

IMO everyone should pay their fair share of taxes. If everyone did, including these big overseas companies, then we may not have the same need for charities, and funding shortfalls with health and education etc. Y

Define "fair share", then define "shortfalls in funding". That's where the problem begins, because it's all a subjective measure as to what the governing party believes is necessary, rather than an objective fact.

The issue in providing a definition provides an avenue for an individual to justify their behaviour from a moral perspective.

Some are clearly pushing the limits though, such as the builder who completed a $40K CASH job.

Fair share is what is defined by the tax rates, and not using different loopholes to minimize the tax one would pay. Fair share is essentially based on a percentage of someones earnings, with higher rates if one earns more. Funding shortfalls can be twisted whatever way it suits someones agenda. But if people are missing out on operations because they don't meet certain criteria for an operation to be funded or have exceeded the quota for that year, that could be seen as another form of a funding shortfall. Or if staff aren' t being paid enough and there haven't been any real age rises for years, then there wouldn't be enough funding, which I think has shown to be the case very recently.

I wouldn't mind seeing the IRD doing adverts on people and companies paying their fair share of tax, showing what it funds etc. I personally don't believe in charities which seem to mop up the shortfalls in government funding. I believe in essential services all being government funded, so everyone is treated equally, and this is paid for out of taxes.

Aredwood

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#2140067 5-Dec-2018 19:30

frankv:

You are still legally required to pay tax, even if no money changes hands. So, if a plumber does $1,000 worth of work for an electrician in exchange for the electrician doing $1,000 worth of work for him, both are liable to pay income tax on that $1,000.

How is that triggered or enforced? As if that is a blanket requirement, then lots of people in relationships are breaking the tax laws.

Imagine a Man and a woman, who live together. The woman stays at home, cooks, cleans, and looks after the kids. The man provides free board and some spending money to the woman. And probably other "service's" of a sexual nature would also be exchanged between the 2 parties to the relationship.

If that couple were not actually in any form of relationship, the woman would be earning a lot of income for providing 24 hour childcare, as well as cooking and cleaning services. And the money from her partner would definitely also count as income that would be liable for tax. The man would otherwise be receiving lots of money in board payments from the woman. (look up how much it costs to rent just a room, let alone a whole house).

Yet the above situation goes on all over NZ and the world. And the IRD and overseas tax authorities don't care in the slightest, that lots of work is being preformed, yet no tax is being declared or paid.

What about if the plumber and electrician still do the same work. But then invoice eachover. And they then refuse to pay eachovers invoices. Are they still liable for income tax?

What about if a tradie does work for free for someone? EG, a family member, a charity, a goodwill gesture to a customer. Examples where the tradie has the legal right to bill for their service's, but they choose not to. Especially as a tradie doing say plumbing or electrical work for a charity for free. Would likely be a far greater help to the charity, compared to the tradie standing on a street corner rattling a donation tin.

Geektastic

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#2140069 5-Dec-2018 19:37

Aredwood:
frankv:

You are still legally required to pay tax, even if no money changes hands. So, if a plumber does $1,000 worth of work for an electrician in exchange for the electrician doing $1,000 worth of work for him, both are liable to pay income tax on that $1,000.

How is that triggered or enforced? As if that is a blanket requirement, then lots of people in relationships are breaking the tax laws.

Imagine a Man and a woman, who live together. The woman stays at home, cooks, cleans, and looks after the kids. The man provides free board and some spending money to the woman. And probably other "service's" of a sexual nature would also be exchanged between the 2 parties to the relationship.

If that couple were not actually in any form of relationship, the woman would be earning a lot of income for providing 24 hour childcare, as well as cooking and cleaning services. And the money from her partner would definitely also count as income that would be liable for tax. The man would otherwise be receiving lots of money in board payments from the woman. (look up how much it costs to rent just a room, let alone a whole house).

Yet the above situation goes on all over NZ and the world. And the IRD and overseas tax authorities don't care in the slightest, that lots of work is being preformed, yet no tax is being declared or paid.

What about if the plumber and electrician still do the same work. But then invoice eachover. And they then refuse to pay eachovers invoices. Are they still liable for income tax?

What about if a tradie does work for free for someone? EG, a family member, a charity, a goodwill gesture to a customer. Examples where the tradie has the legal right to bill for their service's, but they choose not to. Especially as a tradie doing say plumbing or electrical work for a charity for free. Would likely be a far greater help to the charity, compared to the tradie standing on a street corner rattling a donation tin.

I'm not sure how a liability for income tax can arise where no income exits.

If, for example, my neighbour kills a sheep and offers me a couple of legs in return for borrowing my tractor for the afternoon, how much should we remit to the IRD?

MikeB4

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#2140077 5-Dec-2018 19:50

One of best advice I received at business school was don't mess with IRD as they can mess back a whole lot harder.

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