With tax reparations, penalties and interest ballooning to $1.3 million, the owner of a Christchurch chicken business is pondering whether to pay money back or declare bankruptcy.
Chung Tuyen La, who is a partner in Wycola Chicken, has admitted tax offending totalling $900,000.
He was due for sentencing today, when a significant reparation offer may have altered the result – either a jail term or home detention were the likely outcome.
Inland Revenue has been seeking full reparation payment of the $900,000 since his guilty pleas to two charges in October, just as a five-day Christchurch District Court trial was due to start.
However, this week defence counsel Nick Rout has put forward a proposal for La to pay just $700,000 in settlement of the reparation bill and the penalty and interest charges which are expected to expand the total to about $1.3 million.
Mr Rout explained to Judge Brian Callaghan that even if he paid the reparation, La might still end up bankrupt, so he had made an offer to settle the whole amount.
“I really can’t see any other choice,” said Mr Rout. “There is really no point in paying the reparation and still ending up being ‘on the hook’ for about $450,000 in penalties and interest.”
He told Judge Callaghan: “It is not easy to communicate with my client, but I get the feeling there is some room to move.”
La appears in court with the help of a Vietnamese interpreter.
Inland Revenue Department prosecutor Michelle de Villiers said La had offered a civil settlement proposal. The department had asked for more information about where the money would come from, and details of La’s assets and liabilities.
He had pleaded guilty in October, and had been under investigation since 2014. “It seems strange that it has taken him this long to sort out his finances,” she said. The department wanted the sentencing to go ahead.
Wycola Chicken sold wholesale chicken and fish products. Mr Rout said it was a significant business. He had a reference letter for the court from a supplier saying that La’s business bought between $300,000 and $400,000 of chicken per month.
La had admitted charges of knowingly providing false information to the Commissioner of Inland Revenue with intent to evade the assessment or payment of tax.
Inland Revenue said the offending took place between October 2009 and July 2015, when five income tax and sixteen GST returns were prepared and filed that were not accurate because they under-reported income from sales.
The returns were completed by the partnership’s accountant based on information provided by La and the partnership bank statements.
An analysis identified a significant increase in revenue and expenses, significant assets being purchased and owned by the partners, and insufficient taxable income declared to support the purchase of the assets identified.
Mr Lancaster said: “The investigation revealed a number of bank transactions in Mr La’s personal bank accounts and those of his family members. The transactions included cash and cheque deposits and electronic transfers that appeared to be related to Wycola Chicken.”
Several cheques were made out in La’s name, rather than written out to Wycola Chicken.
IRD contacted some customers, identified from their cheques or transfers. Some said La completed the cheques himself, which they then signed. He had told them to complete the cheques in his name, or invoices had instructed that funds were to be paid into a bank account in his name.
Inland Revenue said: “[La] stated that he received funds through gambling. In order to support this position, Mr La provided a document breaking down his casino wins. It is apparent from a review of this document that it has been modified to hide the fact that Mr La has made considerable losses at casinos, totalling $895,014.”
When he was interviewed by IRD, La said that he sometimes withdrew and then deposited cash in order to get Hotpoints on his credit card. He was unable to explain why his expenditure was $280,000 higher than his declared income in the 2011 year, or why cheques were deposited in his personal bank accounts when they appeared to be related to business income.
Judge Callaghan said a substantial offer of reparation had been made and decided to put the sentencing off until May 1 for the matter to be settled. Written submissions on reparations will be put in ahead of the sentencing.