SOCIAL SECURITY

Evening Post, Volume CXXXVIII, Issue 95, 19 October 1944, Page 3

SOCIAL SECURITY

TAX PROVISIONS BREACHED

Five charges under the social security regulations were preferred against the Waiwhetu Bakery, Ltd. (Dixon Bros.), in the Lower Hutt Court yesterday, before Mr. A. E. Dobbie, S.M. Mr. W. R. Birks appeared for the Crown and Mr. N. T. Gillespie for the company, which pleaded guilty to all the charges. It-was explained that the company was practically a one-man company, the principal shareholder being" H. G. Dixon, who was managing director.

Mr. Birks.said the charges fell into three series, the first of which was that'the company had drawn a lump sum at the end of each year which had been paid to Dixon and on which no social security charges had been paid. During the- year a- regular weekly amount had been paid to Dixon, and on these amounts social security charges had been duly paid, but, at the yearly balances, lump sums had been drawn on which the charges had not been paid. In the years 1939 to 1942 lump sums of £520 for each year had been paid to Dixon and in 1943 a lump sum of £766. Dixon's explanation to the Department had been that when he paid the taxes on the amount drawn weekly he considered he had fulfilled his obligation and that the lump sums were profit, to which he was entitled without social security tax. The second series of charges, said Mr. Birks, were based on the clause in the Act which specified that the amount of the tax should be affixed to the wages book, in stamps, within three days, or, in certain cases, paid to the Department. In December, 1943, and February, 1944, the defendant had failed to affix the stamps within the specified time.

In regard to the third series the defendant had fallen into a very common error made by employers who contract to pay the tax for employees. They pay over the full wage to the employee and then pay tax on that amount, overlooking the fact that the tax is part of the men's wages and itself should bear tax. In this case an employee had been paid £9 and the tax paid by the company was £1 2s 6d, whereas it should have been £1 5s 9d.

For the defence, Mr. Gillespie said there was an explanation for each of the offences. The defendant Dixon had failed to distinguish between the company and himself as-sole shareholder. He had paid tax on his drawings of wages and had -assumed that he had already fulfilled his obligation and was entitled to the balance as profit. There had been no guilty intention, and immediately his error was pointed out he had paid the tax, including the penalty. In regard to the second offence he had found it difficult in running his business to buy the necessary stamps within the three days' limit, but the amount had always been put aside and the stamps ultimately affixed. In regard to the third offence the defendant had fallen into a very common error. He had already suffered a penalty of £45, which was required in addition to the £501 he had paid in respect to tax charges on the yearly lump sums. • ■

Mr. Dobbie said it was always regarded as a serious matter to deprive the revenue of its proper amount, but he was satisfied that the breaches were in ignorance, of the law and would take all the circumstances into account. A fine of £3 and costs would be entered on the first charge in the first series and costs only on the second charge. In the second series a fine of £2 and costs on the first and costs only on the second. On the third class of the charges costs only would be inflicted.