Credit: Reseller News
The Inland Revenue Department has issued a warning of severe consequences for anyone who has or uses electronic sales suppression software tools.
Spokesperson Tony Morris said the threat these ESS tools pose to the integrity of the tax system was significant.
“These tools create the electronic version of two sets of books," Morris said. "Using this software amounts to tax evasion, and an aggressive form of tax evasion at that."
ESS tools work by targeting the integrity of transactions, software, internal memory, external filing, or reporting to delete, change, or simply not record select sales data and transactions.
“There is no other purpose to ESS tools other than to facilitate tax evasion or money laundering," Morris said. "ESS tools seriously undermines the integrity of the tax system and IRD has an obligation to honest businesses to stamp out its use."
The ESS methodology was clearly designed to facilitate money laundering and depending on the facts of a case, Inland Revenue may consider money laundering charges.
A new civil penalty and two new criminal offences covering involvement with ESS tools were introduced into the Tax Administration Act in April.
One new section established a penalty of $5000 for the acquisition or possession of a suppression tool while another established an offence of manufacturing or supplying a suppression tool.
A person convicted of that offence could be liable to a fine of up to $250,000.
Another new section established an offence of acquiring or possessing a suppression tool, carrying a fine of up to $50,000.
”Inland Revenue has already identified a number of customers in New Zealand who may have been exposed to ESS tools," Morris said. "That number is expected to grow so Inland Revenue is working hard to identify who else has been exposed.
"When we find them, we will come knocking.”
ESS tools were being used globally to systematically alter point-of-sale data collected by a business in order to understate or completely conceal revenue for the purpose of evading tax.
"Inland Revenue will consider using all available options to respond whenever these tools are found, to protect the veracity of our tax system," Morris said.
Where it identified specific instances of ESS tools being used to evade tax, Inland Revenue said it would require payment of any evaded tax, plus 150 per cent shortfall penalties and use of money interest.
Morris said anyone who believes they may have become involved with ESS tools, should discuss the matter with their tax advisor or Inland Revenue.
They should also consider whether they may need to make a voluntary disclosure.
