Hon Dr Michael Cullen
Minister of Revenue

2 August 2005 Media Statement

Govt blocks tax evasion in fruit picking industry

The government will tighten the law to stop tax evasion in the fruit picking industry, Revenue Minister Michael Cullen announced today.

The move follows Inland Revenue investigations revealing significant evasion of income tax and PAYE on the part of some contractors.

“This is patently unfair to honest contractors who have to compete against those who can undercut them because they evade tax,” Dr Cullen said.

“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.

“To remedy the problem, the government will require 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.

“The change will be made later this month by regulation and will apply from 1 April 2006,” Dr Cullen said.

ENDS

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