Consumer Watchdog: Reprimand for tax firms

Leila Keisha didn't realise she was dealing with two tax refund companies. Photo / Doug Sherring

Tax refund companies make it seem like free money: all you need to provide is a few details and you will be hundreds, or even thousands, of dollars richer within days. With promises of "no refund, no charge", it is little wonder people sign up.

Unfortunately, these transactions do not always go smoothly and the number of formal complaints has led the Commerce Commission to put the entire industry on notice.

The commission found many companies had hidden costs and a lack of transparency. Commission investigator Stuart Wallace warned companies: "If there are any circumstances where a customer may incur a debt, either to the PTSI (tax refund company) or to the IRD, or where additional charges may mean any refund obtained for the customer may be fully consumed by PTSI charges, this should be fully disclosed."

He also noted the companies targeted people who were unlikely to be familiar with the Inland Revenue Department's processes.

Great-grandmother Leila Kesha, 71, was billed for $105 by NZ Tax Refunds after mistakenly signing up with two different companies. Kesha, who works part-time for Auckland District Health Board, said she had no idea she was dealing with two separate enterprises.

"I've been using the other company [My Tax Refunds] for years now and they always take care of it. I've always been very happy with them. When the other company came along I thought it was the same one," she said.

She realised her mistake only when the bill arrived from NZ Tax Refunds, the second company, which demanded payment in seven days and staff refused to budge when Kesha called to sort out the problem.

After being contacted by the Herald on Sunday, chief executive Cilla Hegarty agreed to waive the fee. She said staff were allowed to use discretion when customers queried a bill and she was disappointed this had not been done in Kesha's case.

Hegarty and My Tax Refunds' chief executive, Gavin Barr, said a customer had to fill out an application each year and refunds were never processed automatically.

The Commerce Commission was also concerned many tax refund companies advertised quick turn-arounds, but failed to inform customers Inland Revenue did not release personal tax summaries for the year until June or July. Many companies did not release money to customers until after this time, so someone who applied in April might wait months.

Call centre operator Rhys Tau waited two months for his refund from taxrefunds.co.nz. The company's website states payments were made "usually within seven days".

He was eventually paid last week. "Why tell your customers it's a quick and easy process when it turns out to be two months?" Tau said. "I won't be using their services again. I've heard you can manage your IRD taxes online and can do your own tax refund on the IRD website, so I'm going to learn how to do that."

Taxrefunds.co.nz chief executive Phil Rance said customers were informed, in the confirmation email, that the IRD did not release money until mid-June.

Get your answers from the source

Dealing with the tax department can seem a daunting task, but for most salary and wage earners it is straight forward.

The website link below explains how to get your tax refund directly through the Inland Revenue Department. IRD's online calculator will tell you how much you are owed. The calculator is anonymous and if it works out you have under-paid your taxes, you will not have a bill.

By signing up with a tax refund company, you are engaging a middle man who will take a cut of your refund. This may take away the pressure of doing it yourself, but it might not be faster.

Seek advice from an accountant if your income and tax are complex.

To check whether you are owed a tax refund, free of charge, go to: http://bit.ly/L0rig3