Hamilton man paid staff in cash, trade and ciggies to avoid tax

Karl Edward Barbalich, 41, of Hamilton, has been jailed for a $450,000 tax fraud - but has been granted leave to apply for home detention.

A Hamilton businessman paid his staff in cash, trade and cigarettes in his 10-year long tax evasion scheme that totalled $450,000.

Although Karl Edward Barbalich's offending stretched over 10 years, he may get to serve his time at home after Judge Sharon Otene sentenced him to 24 months' jail in the Hamilton District Court today.

Judge Otene accepted that while his offending was pre-meditated and lengthy, he otherwise had a good record and went to great lengths to pay reparation, which included selling not only his work assets but all of his household contents, including home appliances, for which $20,000 was raised.

Counsel for the Inland Revenue Department, Daniel Phillips, had submitted Barbalich's offending deserved a jail term as he wilfully ignored his obligations to file returns for PAYE, tax and GST over a 10-year period between 2005 and 2015.

Barbalich, 41, took over his father's weekday produce delivery company, KEB Transport, in 1999.

The company distributed goods around Pukekohe, Milford and Thames.

Despite "numerous attempted contacts" from the department, Barbalich and his company were "entirely non-compliant with their tax obligations", a summary of facts stated.

Barbalich had three employees but they were never registered for PAYE and no records were kept - no employer monthly schedules were filed for any wages paid or withholding tax deducted.

Despite Barbalich hiring an accountant, the accountant was never able to contact Barbalich to discuss reports he had prepared.

And although charging GST, receiving income and employing staff, he failed to file income tax returns from 2005, GST from 2007 and PAYE since 2010 and no tax was paid.

When questioned by a department investigator, Barbalich made a full and frank confession.

He said he paid his staff in cash, trade or cigarettes and was aware of his obligations as an employer.

His lawyer Rebecca Senar her client confessed as soon as he was confronted by investigators before selling up everything he owned. That was a sign of his remorse, she said.

She said Barbalich had a problem with gambling which was where most of the money was spent.

"He has put his head in the hand and ignored his tax obligations and it became too much to deal with."

As well as selling his possessions and declaring himself bankrupt, she submitted he had not lived a lavish lifestyle and asked that home detention be considered.

However, Phillips said irrespective of where or how he had spent the money, it had gone.

The 10-year offending period was also "significant", he said.

The judge accepted Phillips' submission and found there were 59 occasions where Barbalich failed to fulfill his tax obligations and agreed it was a significant amount.

"Although you didn't live a lavish lifestyle you still had the benefit of that money ... there's now prospect of recovery because you are now bankrupt."

She said it wasn't a crime against a faceless Government department, rather it was stealing from everyday Kiwis who also had to pay tax.

She accepted that he hadn't gambled for some time and told him she hoped he wouldn't fall back into that trap again.

The judge said she couldn't assess a home detention sentence as she didn't have the required paperwork but granted him leave to apply in the future.