FIRM DENIES TAX EVASION CHARGES: DIRECTORS’ FUNDS

Gisborne Herald, Volume LXXV, Issue 22656, 5 June 1948, Page 4

FIRM DENIES TAX EVASION CHARGES: DIRECTORS’ FUNDS

(P.A.) WELLINGTON. June 5, A denial that press publicity regard" ing the purchase of an expensive launch by one of the defendants had orompted his investigation of the affairs of George and George, Limited, and its directors, Arthur Leonard Roediger George and Clifford Delpay Andrews George, wa3 made by a Land and Income Tax Department witness yesterday. Witness, the former chief inspector of the department. H. H. A. Young, was under cross-examination by Mr. W. E. Leicester, who appeared for the defendant company and the directors.

The case, which involves a total of 16 charges alleging false returns of income from 1943 to 1947, is being heard by Mr. 11. J. Thompson, S.M., in the Magistrate's Court. Mr. W. R. Birks is representing the Commissioner of Taxes. No Special Instructions

Young said he had seen press reports of the purchase of a launch, but the investigation was begun by him on his own initiative as a routine matter. He had no special instructions from his departmental superiors. Some days after he began the investigation he had asked A. L. R. George about his purchase of the launch and a subsequent investigation in Auckland had confirmed George’s statements.

Witness told Mr. Leicester that he began his investigation some time last August and ceased about the middle of November. He had received the cooperation of the directors and the books were readily made available, including the cash inward and cash outward books. There were cash outward books for each year, but only one cash inward book for all the years he was investigating. He had found that invoices for the firm’s operations were available only back to July, and had suggested to the directors in writing that they should be kept for five years as that would assist his department. When he returned from his holidays on February G he had found that the cash inwards books, except for the current year, had been destroyed. It was said that they had been disposed of to make room for future records.

Witness would not agree with a suggestion by Mr. Leicester that the directors could have taken it that the investigations were finished in November. Witness agreed that he had written to the firm at the time asking for a written reply to certain questions. Long Delay in Letter A letter dated December 1 which conveyed the firm's reply had reached his office in the department a few days before Christmas. Mr. Leicester: That is not unusual in the department? Witness: No, but I may have been away in the meantime. When he returned on February 6 witness said he had been surprised to find that the vouchers he wished to check had also been destroyed. Mr Leicester: When you referred to this in your earlier evidence did you wish to convey to the court that there was something being concealed? Witness: That is a matter for the Court, I think. In reply to a further question by Mr. Leicester, witness said that in law the onus was on the taxpayer to prove the correctness of his returns, but there was nothing in the Land and Income Tax Act making it incumbent on companies to keep their vouchers. He had found, however, that it was usual for companies to keep them for four or five years. Mr. Leicester: Does the department investigate the accounts of all firms or just pick some out? Witness: In the present shortage oi staff it is not possible to get round them all. Most commercial firms realise that they are liable to inspection at any time. » Witness told Mr. Leicester that in the November letter to the firm he had suggested that some of the cash sales were short stated. No particulars o£ these were given and the department was under no obligation to give them. After seeing the records he would say that some of the cash payments could not be traced. He could not point to any particular instance, but the cash for payments had come from somewhere and the department _ could not accept the Georges’ explanation of personal savings. ~ After detailing year by year the profits returned by the company from 1940 to 1946 and obtaining witness agreement with the differences of a few pounds in some cases, Mr. Leicester said they totalled £78,832 on which £55,587, equal to 70.6 per cent or 14s ljd in the £ tax was paid. . Witness said they were probably in line with other companies of the same size. _ Witness said that with investigations of private companies the personal affairs were always investigated. It was strange if the directors had loose cash at their homes, as they stated. They had not applied it to reducing the firm’s overdraft and so save bank charges. ~ Mr. Leicester: I put it to you, there are thousands of people who keep large sums of money and keep it under their bed rather than in a bank, and that your department would like to get down on it for tax purposes. Witness: Yes, and I think we all know the reason. Statements Did Not Agree Witness agreed that since i™V OTt licensing was introduced there had been shortages of certain commodities. I£ such goods were available for cash, firms were entitled to purchase them. He had seen three of the travellers from whom George and George had made purchases for cash. They would not agree that the purchases were to the extent George and George had, stated, however. They did not agree by a long way with George ana George’s records. There was no legal obligation on the directors to keep complete records o£ their private affairs, and such were rarely met, said witness. Individual directors might have made savings m the depression years when they continued to draw good salaries, a bonus and directors’ fees. ' ~ Witness agreed that there was nothin# sinister in payments by Miss Winifred George to C. D. A. George on his return from the war of the balance o£ the salary drawn by her while replacing him as a director in his absence. It seemed feasible now, but in the light of incomplete knowledge witness had thought the explanation a sham. He was not aware if gift duty had been P3 Mr Leicester: I suggest that you entered upon this investigation with i a feeling that the directors had been misusing the firms money. Missing Vouchers Witness: No. but when I had seen the books and found vouchers missing. “I put it to you that from the firs, you have taken the attitude that the directors were guilty until they were proved not guilty. —No, but in this case there is proof needed. They could not convince anybody without vouchers. “If the directors’ personal funds were in fact used to pay for goods purchased they were entitled to reimbursement?—Yes, but they should produce vouchers in support. Re-examined by Mr. Birks, witness stated that the retention of records was discussed with the firm m November. They could be' kept and were kept by some other firms for other purposes than tax checks. The Price Tribunal, for instance, might require them. At the request of Mr. Birks, witness summarised the grounds for the department’s action as follows: (1) Combination of circumstances, including the missing vouchers and alleged purchases for which money went into the private accounts of the directors. (2> When he interviewed the firm he did not get the satisfaction he should have got. (3) The fact that both the Georges "ontended they saved loose money over a period of years. (4) The opening by one of the Georg - of a bank account in another bank than that used by the firm. (51 The fact that the firm earned a bank overdraft and the direct *s had the savings they stated. At the conclusion of witness’ evidence the Court adjourned to a date to be fixed by the magistrate.