More on TUIA union tax write off

A reader emails about my post on Sunday covering some shonky accounting at TUIA union.

Some comment on the TUIA tax write off.  There are three possible ways TUIA got the write off they received.

  1. Staff incompetence on IRD’s part;
  2. misleading conduct by TUIA; or
  3. A combination of 1 and 2.

I am guessing a combination of 1 and 2 and I will explain why.

The Tax Administration Act sets out IRD’s duties and provides for the circumstances where a write off can occur.

The Inland Revenue Commissioner (and all his staff) has a duty to uphold the integrity of the tax system and a duty to collect the highest net revenue practical.

Its pretty simple when you consider both these duties – if you owe tax and you have the means to pay you need to pay. If you don’t have the means to pay you may get relief.  If you undermine the integrity of the tax system (decide not to pay tax, engage in tax avoidance) you will still have to pay but the mercy may not be there if you can’t pay. In these circumstances rather than provide relief through a write off it may be considered more appropriate to bankrupt or liquidate and also consider some criminal sanctions.  

The Tax Administration Act does provide for tax write off in the right circumstances.  But in considering write off Inland Revenue still has to maximise recovery.  There are two broad criteria for write off:

1.  Serious hardship; and

2.  Maximum recovered

Serious hardship only applies to individuals.  One exception is where enforcing debt against a company will cause an individual to be placed into serious hardship. Serious hardship cannot apply to TUIA.  It is an organisation based on membership not some one man company that if forced to pay debt could place its director into hardship.

Maximum recovered is simple.  A taxpayer owes $100k they have assets of $50k, you get them to pay something in the region of $50k.  You cant get blood out of a stone.

Going by what the Owl has provided and considering the above TUIA were required to pay all of the outstanding tax.  As I said above my guess as to why tax was written off is that this is a combination of staff incompetence and TUIA deceit.  Lets give a little credit to Inland Revenue staff, they start from a position that total tax owing should be paid.  However, in the right circumstances it might not take much for TUIA to convince IRD that some or all of the tax should be written off.  A few lies, a bit of deceit and voila. Public servants default to the easy answers and take the path of least resistance all the time – write off is easier than enforcing debt.

Thank god the Tax Administration Act does provides for write offs to be reversed if the decision was made on misleading information.

So what to do?

The thing that really ticks me off about this is that the greatest advocates for progressive tax and use of taxes to provide social support are unions.  You would think they would voluntarily honour their duty to pay tax, set an example for others .  From a moral point of view TUIA should have been committed to paying the tax rather than seeking a write off.  How many public hospital operations does $118k cover? What resources could it provide a decile 1 school? etc etc etc. They should just fess up and pay up.  If they refuse to pay up then a complaint should go to the Inland Revenue Commissioner complaining that they have misled Inland Revenue and that the write off should be reversed and the tax collected.

Maybe we will see the result in next year’s financial statements if someone is prepared to write to TUIA and convince them to pay or complain to Inland Revenue to force Inland Revenue to comply with the law.

Maybe you can put it to the Army to take up?

 


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  • Ultimately that’s 60k that we needed to pay bills at a hospital or pay for a classroom.

    What is the mechanism for having this decision reviewed?

    • Guest2

      write to Andrew Little and Russell Norman an ask them to investigate. It is their politicial and civic duty

  • notrotsky

    Leave the Maori union alone you’re just being racists !

  • Callum

    The big detail missing here is not what is in the accounts, it is what is in the various returns to the IRD. Currently all comment is uninformed as we don’t have the full information. Over the years I have seen plenty of organisations take a conservative approach and include potential liabilities to the IRD which are then reduced on settlement sometmes years later.

  • Time For Accountability

    Based on the information on the Society registration site there is no doubt the union in dodgy and NZICA members and the auditors need to answer some serious questions.

    The union commenced on 7 November 2000.
    The first set of what could be called Financial statements was filed for the year ended 31 March 2008 which contained comparative figures for the year ended 31 March 2007.

    The only accounts filed prior to 2008 were 2003 and 2007 which only contained a statement of income and expenditure with no Statement of Financial Position. These are not what can be called Financial Statements. The filed 2007 financial income and expenses do not agree with the comparative figures for 2007 in the 2008 published accounts.

    Rule 10.1.6 required the accounts to be audited annually. The first audit was conducted on the 2008 Financial Statements.

    So for the periods ended 31 March 2001, 2002, 2003, 2004, 2005, 2006, 2007 the not only failed to prepare proper accounts they broke their audit rules. They should be made to prepare accounts and audit them for the missing periods. No where is this pointed out by the auditors.

    The first wages paid were in the 2010 Year, Between 2010 – 2013 total wages of $87,800 were paid, accordingly there is no possible way a PAYE write-off gain of $93,097 could have been received as it would exceed the total Gross wages paid for the unions entire existence. The NZICA auditors and preparation accountants need to explain.

    The items of expenditure to examine are: Delegates Fees, Meeting Fees and Travel Expenses. The later two are extraordinarily high for the size of the Union. I conclude this is how the executive extract their share of the cake.

    In 2009 the union admitted tax irregularities and made a provision for withholding tax of $70,000 being 33% on payments made. They do not describe the payments this relates to. But it is indicative of a gross of approx $212k or $142k in the hand.

    I believe there are grounds to believe that the Union did niot have to pay the $70k provided in the accounts plus and additional amount of $23,097.

    Paye and Withholding Tax are two entirely different things. If there was a withholding liability then the recipient is essentially self employed and would pay tax on the amount received. It is difficult to apply the withholding tax rules to receipts from a union. But it would be hoped if the IRD forgave the Union Withholding tax the recipients paid in their own name bearing full penalties and interest.

    The auditors and accountants missed this liability in their first audited accounts for the year ended 31 March 2008 and i believe that is simply incompetence. The alternative is that the provision was simply wrong.

    It took from 2009 to 2013 to conclude the arrangement with the IRD. I have never known a simple matter such as this to take so long.

    As Owl points out by the time the remissions were recognized there was money in the bank.

    I note that the changes in preparation accountants during the period and wonder why.

    Why am not surprised that NZICA members are allowing accounts to be presented to members and the public which do not have sufficient detail to be properly understood. It is yet another example of practice review not picking up questionable accounts and audits.

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