How can someone get themselves into this situation (IRD)

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Forums › Finance and wealth management › How can someone get themselves into this situation (IRD)

networkn

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#147367 17-Jun-2014 13:43

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11275741

He owes $367 MILLION Dollars to them. How was it, that they gave him a "line of credit" equal to that. Surely at 100M it would have been major alarm bells.

Insanity.

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#1067453 17-Jun-2014 13:45

Wow...
Just how someone achieves that is insane. Maybe he should be bankrupted and pay all he has like every other fair citizen does.

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networkn

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#1067455 17-Jun-2014 13:49

TimA: Wow...
Just how someone achieves that is insane. Maybe he should be bankrupted and pay all he has like every other fair citizen does.

But surely heads should roll at the IRD too. Who lets people run those sort of debts up.

dejadeadnz

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#1067457 17-Jun-2014 13:50

This is actually all rather easy.

In this particular case, this guy isn't being chased just for his own tax debts. He was found to have assisted with tax evasion by others and in turn became liable for the tax that the IRD missed out on. So in THIS case, this explains why the amount is so huge - he wasn't given a line of credit or whatever - it was just that after a Court of Appeal judgment held him liable for assisting with tax evasion, the IRD presumably did the sums of tax losses incurred, added up the penalties and lost interest, then gave him a notice.

What people typically do after they receive such notices is they try to drag things out and contest the notice (it's actually very hard, you must do it within a prescribed time period and in prescribed forms). When they don't do things in time, the notice becomes final. Then the IRD goes to enforcement stage and usually tries to bankrupt the person.

This is coming from a RL lawyer...

networkn

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#1067458 17-Jun-2014 13:52

dejadeadnz: This is actually all rather easy.

In this particular case, this guy isn't being chased just for his own tax debts. He was found to have assisted with tax evasion by others and in turn became liable for the tax that the IRD missed out on. So in THIS case, this explains why the amount is so huge - he wasn't given a line of credit or whatever - it was just that after a Court of Appeal judgment held him liable for assisting with tax evasion, the IRD presumably did the sums of tax losses incurred, added up the penalties and lost interest, then gave him a notice.

What people typically do after they receive such notices is they try to drag things out and contest the notice (it's actually very hard, you must do it within a prescribed time period and in prescribed forms). When they don't do things in time, the notice becomes final. Then the IRD goes to enforcement stage and usually tries to bankrupt the person.

This is coming from a RL lawyer...

Hmm, hard for me to understand how he could be solely liable, unless he was doing it without the permission of his clients, which would be a crime.

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#1067459 17-Jun-2014 13:53

The tax laws are a minefield

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#1067460 17-Jun-2014 13:54

Russell's original tax bill was around $5m, but penalties and compound interest over 25 years inflated it to $138m at the time of his High Court case, and in excess of $177m when he went to the Court of Appeal.

That's how.

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#1067472 17-Jun-2014 13:56

The article states his tax bill was about $5m, the rest is fees and interest over a long period.

This doesn't seem to align with the info that he is being charged for helping other evade tax too.

I can't believe they can do that or every big accounting firm in NZ would be bankrupted.

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#1067473 17-Jun-2014 13:56

Inphinity:
Russell's original tax bill was around $5m, but penalties and compound interest over 25 years inflated it to $138m at the time of his High Court case, and in excess of $177m when he went to the Court of Appeal.

That's how.

$5m to 367M, seems perfectly reasonable. NOT.

How could it take 25 years to resolve. Good grief.

dejadeadnz

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#1067479 17-Jun-2014 14:02

networkn:

Hmm, hard for me to understand how he could be solely liable, unless he was doing it without the permission of his clients, which would be a crime.

They won't be just chasing him and would certainly be chasing the primary dodgers as well. However, our law works (generally) like this when you and others jointly wrong somebody. If both A and B are found liable to have wronged C, unless the court explicitly makes a ruling as to rate of contribution by A and B, they are described as jointly and severally liable. What will happen in real life is that C will often choose to go after the party with the most ability to pay, let's say it is B in this instance. B can then seek a contribution from A but if A happens to have gone insolvent or can't pay for any reason, B will have to meet 100% of the liability or risk being made bankrupt or liquidated in the case of a company.

This is how, for example, the local councils frequently become the "last man standing" and end up paying everything to fix a leaky home when in reality their negligence might be far less contributory than, say, the building inspectors (the private ones back in those days) and engineers etc, who have all gone insolvent.

For people who are still confused: read the article again. This guy operated a tax evasion scheme from the 1970s to 2000 and channelled his own income and others' income through the scheme. However, a tax evasion scheme isn't a tax evasion scheme until the courts finally rule it is so. The Court of Appeal is our second highest court and the fact that the Supreme Court wasn't mentioned presumably means that his attempts to bring his appeal to there failed. So when you bear in mind that the IRD is calculating backdated, compounded interest on what taxes they should have received if the guy wasn't running a scheme over 20+ years ALONG with helping others evade taxes also (plus penalties that can run to 100%), the inflation isn't that extraordinary.

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#1067484 17-Jun-2014 14:04

networkn: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11275741

He owes $367 MILLION Dollars to them. How was it, that they gave him a "line of credit" equal to that. Surely at 100M it would have been major alarm bells.

Insanity.

Personally I think there is also a failing by the IRD.

The penalties scheme is ridiculous and punishes excessively.

Of course, this guy has himself to blame but these penalties are just stupid.

networkn

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#1067486 17-Jun-2014 14:06

surfisup1000:
networkn: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11275741

He owes $367 MILLION Dollars to them. How was it, that they gave him a "line of credit" equal to that. Surely at 100M it would have been major alarm bells.

Insanity.

Personally I think there is also a failing by the IRD.

The penalties scheme is ridiculous and punishes excessively.

Of course, this guy has himself to blame but these penalties are just stupid.

Not to mention that the Govt will have had that sitting in their "assets" side of the ledger, so when they bankrupt him getting all $11 he has on his person, they will be "out" by $367M.

Someone at the IRD should be facing prison for criminal negligence in my opinion.

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#1067487 17-Jun-2014 14:06

IRD is not responsible for setting the penalties, the Beehive is.

DarthKermit

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#1067497 17-Jun-2014 14:12

$367 million? Might as well be 367 trillion. It's not like he can ever pay more than a fraction of the total.

Whatifthespacekeyhadneverbeeninvented?

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#1067533 17-Jun-2014 14:27

KiwiNZ: IRD is not responsible for setting the penalties, the Beehive is.

I'm sorry, but common sense should prevail here. Surely when it went from 5M to 100M with no signs of resolution, the Govt could have called a special meeting, and arranged a panel, even if the cost of that was $2m that meeting should have been binding and the matter should have been resolved.

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#1067553 17-Jun-2014 14:33

networkn:
KiwiNZ: IRD is not responsible for setting the penalties, the Beehive is.

I'm sorry, but common sense should prevail here. Surely when it went from 5M to 100M with no signs of resolution, the Govt could have called a special meeting, and arranged a panel, even if the cost of that was $2m that meeting should have been binding and the matter should have been resolved.

That unfortunately does not stop the statutory requirements, IRD like other Government agencies are subject to the empowering legislative requirements, any discretion if available must be authorised by that legislation.

If the statutes state that penalties etc must accrue and be levied by A+B+Cx D then they have no option

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