The Application of Penalties for Tax Evasion by the New Zealand Courts
Yerra, Sai Akshay Kiran
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The main objective of this research was to investigate the reasons for the variations in punishments imposed for the evasion of different types of taxes. Previous studies have found that tax evaders are treated less harshly by the New Zealand courts. However, most of the prior literature remains under-informed about the rationale for imposing different penalties for tax evasion from a judicial perspective. This study examined 37 tax evasion cases between 2009 and 2021. The findings show that most tax evaders are treated leniently by the courts, as represented by the various sentence discounts issued to them despite the seriousness of their offending. However, the courts were also reluctant to issue discounts in cases where the taxpayer is undeserving of the leniency. Based on the analysis of the cases, non-custodial sentences were mostly issued to taxpayers who had pleaded guilty at the earliest opportunity; were of “good character”; took responsibility for their actions; demonstrated full cooperation with the IRD; had serious medical issues; had no previous convictions; were the sole income earners in their family; or did not use the evaded money for their personal expenditure. A custodial sentence was imposed when the taxpayers did not show any remorse for their actions; had gone into extreme lengths to conceal their offending; had previous convictions; did not co-operate with the IRD; and had used the proceeds of their crime to fund a luxurious lifestyle. The prison sentences were much higher in cases where the tax evaders were convicted under the Crimes Act. The issuance of a reparation order was dependant on the taxpayers’ financial circumstances. The study found that cases involving income tax and GST are treated more harshly by the courts. This study contributes to the existing literature by identifying the parameters considered by the courts while deciding the degree of punishments for tax evasion. Future research should explore the punishments issued to tax evaders in other countries. The aggravating and mitigating factors in other blue-collar crimes in New Zealand should be examined to determine the reasons behind the courts issuing harsher sentences to blue-collar criminals than white-collar criminals.