Company director jailed after KiwiSavers left $100,000 short

Monday, 22 May 2023

The Inland Revenue takes prosecutions when companies and directors fail to pay the tax that is due.

An Auckland company director has been jailed for tax crimes that left dozens of workers owed more than $100,000 in unpaid KiwiSaver contributions.

The Inland Revenue Te Tari Taake said David John Gower was sentenced in the Auckland District Court on May 16 to two years and three months in prison.

Gower was charged with aiding and abetting AFS Total Fire Protection in deducting PAYE, KiwiSaver employer deductions, student loan employer deductions and child support from employees’ wages.

But the money was never passed it on to the Inland Revenue.

* Earthquakes blamed for failure to pay $100,000 in tax

Once all sources of income are taken into account, the wealthiest Kiwis are taxed at a rate of 8.9%, according to a separate report from Inland Revenue released earlier this year. (Video first published April 26, 2023)

* Developer challenges regional council over its building project

AFS installed and maintained fire and emergency systems and had about 80 employees, but was put into receivership and liquidation in December 2016.

Inland Revenue said the company owed $108,305.28 unpaid KiwiSaver employer contributions, and $40,869 in unpaid employer superannuation contribution tax.

It said AFS’s workers never got the benefit of that money or any interest on it.

When AFS was placed into liquidation it owed $2.65m of PAYE debt, and $1.37m of GST debt.

“That was after Inland Revenue agreed to hold off on liquidation a number of times to give Gower the chance to stick to a plan for re-payments,” a spokesperson for Inland Revenue said.

He failed to stick to the plan, and despite repeated attempts to contact Gower, and warnings, the offending continued for 17 months after a warning letter in May 2015, the spokesperson said.

Nationally, unpaid KiwiSaver entitlements remain a big problem.

At the end of March 2022, there was combined PAYE and KiwiSaver debt to the Inland Revenue of $822.3m.

That was up from $741.3m at the end of March 2020.

However, it was down from $919.6m in 2021, which Inland Revenue put down to large corporates making large lump-sum payments during the year.

Gower pleaded guilty to a representative charge, covering 49 tax periods, a week into the jury trial, the Inland Revenue spokesperson said.

“Before that plea, the jury was told there are some basic rules everyone follows when they choose to run a business – including paying creditors, paying their staff, and paying tax,” they said.

“Prosecutors told the jury that carrying on a business without paying taxes is unfair to employees, unfair to other businesses and unfair to other taxpayers.”

Gower had been the director of 20 companies since 1989 and admitted he was aware of his obligations as an employer.

He has repaid $300,000 in reparation, the Inland Revenue spokesperson said.

Gower was bankrupted in October 2017. His bankruptcy has now been discharged, the Insolvency Register shows.

CORRECTION: An earlier version of this story said the company owed $1 million in KiwiSaver contributions. This was due to incorrect information supplied by Inland Revenue. Updated March 23, 5.43pm.