HARVEST OF SPOIL FOR THE DODGERS

NZ Truth, Issue 1146, 17 November 1927, Page 1

HARVEST OF SPOIL FOR THE DODGERS

' Truth' Throws The Spotlight On

Big Rents In The Bag

HAVE you paused to consider for a moment, Albert Edward Fowler, Commissioner of Taxes, that your department, and m turn the State is probably being robbed of £1,000,000 every year by the clever trickery of smart business men who are openly, but cleverly,, \beating the law to a stand-atill with flagrant impunity?

It is just, possible that the fact of serious leakages may have escaped your notice, and if so "N.Z. Truth" takes this opportunity of showing you how the State can be and probably is being robbed of lawful revenue m a manner which under present conditions absolutely defies detection.

The annual loss to the state by specious trickery of tax manipulation has been roughly estimated for the purpose of this article at £1,000,000. The actual loss may- be less, of course, but having regard? to all the informa-

tion m the possession of this paper the probabilities are that the leakages far exceed a million. .

The whole question opens up all kinds of issues involving the business world m all its various branches, and the bigger the business the bigger can be' the fraud — for bare-faced fraud and evasion of the Statute some „of the methods ; that can be employed undoubtedly are. • Some startling facts .governing the position have come to the knowledge of "N.Z. Truth," and investigations go to show that there are many ways m which: the State can be- robbed with impunity. ' "

The whole position, as disclosed by "Truth's' inquiries merely goes to show that laws are made to be broken, presumably, especially when •" they touch people's pockets, and when they can be broken without much fear of detection. '

Has the Commissioner, for, example, given due thought and consideration

One million pounds annually lost to the State through the astute manipulation of income-tax returns. A startling disclosure !

to do so, and m general practice it is not done. Cash, paid out on bearer cheques ia most difficult to ty"ace. It need not figure on the recipient's books: It can be spent on house renovations; transferred to his wife, or, sunk m some form of security and otherwise disposed of m a manner which leaves little or no trace. But m whatever manner -it is disposed of, the fact remains that it is dodging income tax. So much for "bearer" cheques? But what of "contingent accounts"? Here again is a prolific source of income tax evasion. , How the leakage occurs

under this head. is surprisingly simple. A man, . for •which shows him a profit' of, say, £500. What course is open to him to evade the tax? All he 'has to do is to* start a voluminous corres- '• pondence with the other party, raising: some question about the goods and expressing doubt as to the standard of same, and the '• deal becomes m legal parlance "sub judlce." , In other words those profits are "left m the air" for the purpose of tax and by an astute arrangement and protracted argument between the parties the matter goes on, until the* 1 next return is due, when the subject can be conveniently forgotten and < the profits pocketed. .All trace of the deal is m effect lost, for there is good reason to assume

that & contingent account mentioned m one yeari's income , tax return is not checked' up by • the Department when the return for the following year goes m. . ■ . [ Of course, there are 1 cases where

protracted contingent accounts have been discovered. .. ' One I case was exposed some years ago, when a certain firm's books showed a sum of over £20,000 under the category of "Contingent Account," and*it had been running on for years. In fact, when the overseas firm, with vvhich the firm m question had been m correspondence over the "cbntin-' gency," was traced, it was discovered that the overseas concern had been m liquidation for a period of three years before the discovery of the position. Such transactions, and .^ the profit that accrues \J&sii from them, are nobody's Jtimm money*! ■ wxiiio .xxiq uisput© ■, JRJGSbm

It is shown as a liability, and the Commissioner of Taxes has to so regard it. The next year the same account may be shown on •the return, but do the Commissioner and his staff have any proper system of checking it off with the previous year's returns, or when a case is discovered, is it just a matter of mere chance?. The Commissioner may argue that auditing of books and the examination of stock sheets is sufficient deterrent against such evasions. - * ; But, assuming- that a firm is intent on tax evasion, what value has a stock . sheet for the most astute of auditors? It has to be remembered, that' the auditor prepares | his balance-sheet and returns from the books and information supplied to him. ,

He has the stock sheets m front of him, but that, does not .necessarily

Facts Reveal How Shrewd Heads Can Always Beat Law

mean that he has an exact statement of the .goods m stock. The auditor is not to know, and prepares his balance-sheet on the facts before him — assuming always, of course, that he credits the firm with having given him the correct information. This weak-, ness m itself leayes -many big loopholes for.' tax 5 manipulation, whatever the Commissioner may' have to say m rebuttal. / ■ " ' ■ ■ . i ■ '

What . check has the , Commissioner or his department? .' ); ' Practically none, because it cannot be disputed \that 90 per cent, of business firms?' throughout, vthe, country have not had an", income tax "official m their iflffices -during' the .past; ten years or more. ' . . .'

, Until the Commissioner looks' into the actual stock bougtit and handled, and takes less notice of stock sheeta there will always be the possibility tor leak 7 ages to occur on a small or a big scale, •

Any evasions of this nature that occur are directly attributable to, the careless system of the Tax Department, .which business people who are out to evade feel gives a very good safety zone providing reasonable immunity from, detection. What- the Commissioner must do if the possibility of tax evasion is to be avoided is to get down" to the practical r side of examination of stocky and accounts generally, and not confine himself merely to the accountancy side; : .

He should' exercise the right which he must possess and search stock. There would be no harm done if various firms m different -classes of business, were annually visited and .the stock— not the stock sheetssearched', v