IRC: Firm evaded millions in tax

THE Inland Revenue Commission (IRC) has revealed that a big company deliberately manipulated its declarations, claiming millions of Kina in Goods and Services Tax (GST).
IRC commissioner-general Sam Koim said the retailer (name withheld) manipulated the Enterprise Resource Planning (ERP) and accounting software package to evade tax.
“The IRC audit revealed that the taxpayer intentionally manipulated their ERP system to evade tax, and making false declaration to benefit from GST credits for the period January 2016 to August 2019,” he said.
“(The) large retailing/wholesaling and merchandising business incorrectly applied tax coding/treatment of trading stocks of taxable items as non-taxable and thereby understating taxable sales.
“For instance, trading stocks for which 10 per cent GST should be applied were incorrectly coded into their ERP system as non-tax.
“In such a setup, the taxable sales are understated, resulting in less GST collected and the net effect would be in a refund position.”
Koim said as a direct result of the incorrect tax coding /treatment of trading stock in their system, the company was “in a credit position of more than K10 million in GST, of which K8 million directly resulted from incorrect tax treatment on the trading stock”.
“The audit has corrected the incorrect coding/ tax treatment and made an establishment of more than K23 million in audit discrepancy for the same period netting off the credit and resulting in additional tax payable of more than K64 million, inclusive of a penalty charged at 300 per cent, as additional tax in case of evasion.”
Koim said the IRC was now adopting ways to detect and punish taxpayers who failed to operate and maintain an ERP and accounting system within the tax rules.
“Making false and misleading declarations to IRC is a serious offence with a jail term of not more than four years,” he said.
“IRC will prosecute not only the taxpayer, but also those responsible for manipulating systems and making false declarations to IRC to reduce their tax liability.”