Govt to curb tax evasion in fruit picking industry

The law is to be tightened to stop tax evasion in the fruit picking industry, Revenue Minister Michael Cullen said today.

Inland Revenue Department (IRD) investigations had revealed "significant evasion" of income tax and PAYE by some contractors.

"The evasion occurs when contractors create companies through which they channel income from fruit picking, pay net amounts to their workers and then leave the country soon afterwards without paying a cent of tax for themselves or their workers," Dr Cullen said.

This evasion was patently unfair to honest contractors who had to compete against those who could undercut them because they evaded tax, he said.

The Government would fix the problem by requiring growers to deduct 15 cents in the dollar from payments made in relation to seasonal labour for agricultural, horticultural and viticultural thinning, picking, packing and pruning activities.

"Honest contractors with a good compliance history will not suffer because they will be able to apply to Inland Revenue for a special tax rate certificate authorising growers not to deduct tax from payments to them. This will result in the same tax treatment that is currently available to companies."

Dr Cullen said the change would be made later this month by regulation and would apply from April 1, 2006.

- NZPA