Million dollar tax evasion earns couple jail time and home detention

Wednesday 14th November 2018

Paying employees under the counter, failing to declare cash sales and reporting substantial losses to avoid both company tax and GST has landed a Hastings couple with prison and home detention sentences for tax evasion totalling more than $1 million.

Rakesh and Nalini Kumar operated Red Chilli Restaurants and Take Away in Taradale and Indian Palace Restaurant in Napier, and dairies in Hastings and Mount Maunganui and other businesses.

The Inland Revenue Department began investigating the couple's businesses after noting abnormally low cash sales at the Red Chilli restaurants between 2009 and 2015.

Indian Palace also had similar abnormally low cash sales between 2010 to 2015.

Rakesh Kumar faces a two-and-a-half year prison term after pleading guilty to providing false tax returns and evading tax totalling $833,249.99, while Nalini Kumar has copped a sentence of five months home detention and 100 hours of community work after pleading guilty to evading tax totalling $127,029.60.

The evasion consisted of a combination of paying employees in cash and not declaring their earnings to IRD, reporting substantial losses between 2010 and 2016 for income tax and GST purposes, and under-reporting cash sales.

“In one year, the companies’ tax returns stated less than 1% of its sales were cash sales, compared to the industry average of 30%. Both restaurants PAYE returns also understated staff numbers, with Indian Palace claiming only one employee over the busy Christmas holiday season in 2010-2011,” IRD spokesperson Karen Whitiskie said in a statement.

Meanwhile, the companies' bank records were showing substantial cash deposits.

“Defrauding Inland Revenue is not a victimless crime," said Whitiskie "It’s straight theft from the community. As the Court of Appeal has said, nothing is more corrosive than the sight of people apparently earning high income and evading payment of tax.”

(BusinessDesk)

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