Classic case of excessive penaltys & interest

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11446426
Yes he's a sneaky bugger
yes it's over several decades
yes he deserves to be cleaned out

My point is that while his base debt is $5.7M,due to penaltys & interest added regularly on top of each new amount owing, he now owes $485M.
He's being taxed on the tax & penalty added amount + interest & taxed on that again.

Classic case of the govt not knowing when to stop adding tax/ penalty's & interest

geek_mrfxit, May 13, 10:16 am

I see it as people blaming the govt for what is obviously one guys own fault.

geek_suicidemonkey, May 13, 10:34 am


Yep definitely his own fault but blowing $5.7M out to $485M is simply tax on penaltys + interest + GST to create the excess $479.3M.

Wonder how many times each revised amount including penaltys + interest + GST has again had the extra penalty's + interest + GST added.

$479.3M of tax on $5.7M debt

geek_mrfxit, May 13, 11:00 am

If he wasn't an acct I might feel a bit sorry for him. Have been in strife with IRD myself. Own fault trying to prioritise time & put IRD at the bottom of the list thinking I could easily catch up on the outstanding plus interest. What I didn't know about was the penalties, which are calculated often (daily? weekly?) and compound. Very nearly put me out of business at the time. The penalties are horrendous. My fault, but I'm not an accountant and thought I was literally just buying time & at a reasonable rate. But this guy is an accountant. He must have known what he was doing, or trying to do. i.e. rip off the government.

geek_richard112, May 13, 11:17 am

From what I remember this guy ruined a lot of people lives Tough sh. t.

geek_gazzat22, May 13, 12:02 pm

And his solution, pay it back at $50,000 per year until death. Even the min amount of $5.7m would take 114 years and at 80, this guys got a max of 20 years to live. He's having a laugh!
IRD can now bankrupt him and then the official assignee will be able to seize all his assets, including trusts and other sources that he has hidden away.

geek_d.snell, May 13, 1:15 pm

Yep all fair enough.
Aside from the fact he's an accountant & deserves a thrashing in public.

My point is that It's still a pretty nasty & stupid example of how penaltys + interest + tax's can far far out weigh the crime.

geek_mrfxit, May 13, 2:21 pm

I thought they stopped doing excessive penalties years ago because too many people topped themselves - apparently not

geek_king1, May 13, 2:51 pm

Yes, but IRD are quite good at reversing those penalties when some real form of repayment is put in place. In this case, I suspect the IRD said, "Stick two fingers up to us, and we will come down heavy on you"

geek_d.snell, May 13, 3:20 pm


Yea your debt multiplied by 85 can make you do some pretty stupid things.

geek_mrfxit, May 14, 11:20 am



Like the guy in the states a few years ago, battling IRS, topped himself by flying his light aircraft into the local IRS office building.

geek_ross1970, May 14, 1:37 pm

They guy is clearly a dick. No arguments there.
But 5.7 million compounding to 485 million is completely unjustifiable. Even over a number of years there is no sane way to rationalize that sort of financial penalty.

geek_oclaf, May 14, 2:13 pm


Perfect

geek_mrfxit, May 14, 2:31 pm



yip, that sums it up.

geek_ross1970, May 14, 2:44 pm


So what's the alternative? if this guy had been talking with IRD and working some payment out, he wouldn't have these penalties. He chose to tell the IRD to stick it and continued to stall through the courts. He was aware of the implications and decided to live the good life, spending and hiding as much money as he could. REMEMBER it's you and me this guy has cheated, not the IRD, they merely administer it on our behalf and I don't like thieves and cheats, one little bit, so absolutely NO sympathy whatsoever for this clown.

geek_d.snell, May 14, 2:50 pm

Ballooning out to $10mil, yea ok & THEN nail him hard, but to let it go to $485mil is simply ludicrous.
Thats asking for a fail.
Theres a certain point in debt where everybody simply say's . Yea NAH.
$10mil he could have dealt to or been dealt to via assets etc.
In his case $485mil is a simple Yea NAH.gf'd

geek_mrfxit, May 14, 2:57 pm



Yes the guy cheated the government and the tax payer. But to inflate 5.7 million up to 485 is ludicrous. They may as well just rounded it up to a solid 1 billion for all the difference it would make in paying it off. Adding exorbitant penalties and penalising interest rates are only going to exasperate the problem of debt collection. There is a certain level of debt inflation where people are just going to tell you to F-off and stop even trying to pay because there is simply no point.
Very quickly, a difficult but manageable outstanding tax bill will snowball into something utterly impossible. At a certain point you have to ask who is actually ripping off who.
The only other industry I've heard of that can perform that sort of accountancy alchemy on debt are illegal loan sharks.
I don't know what IRD's interest rate is, but if they can do that, then I am sure it is out of line with other interest rates in a way that could only be described as exhorbitant.
The alternative. Keep penalties manageable and don't use interest as a penalty. There will always be those who avoid tax. But crippling penalties that have no chance of ever being repaid are no solution at all.

geek_oclaf, May 14, 3:21 pm

Weren't the powers that be trying to put the brakes on dodgy loan sharks who charge too much in interest/penalties recently.

geek_king1, May 14, 4:39 pm

5% a month compounds to 85x in 7 1/2 years. Not completely ridiculous.

geek_emmerson1, May 15, 11:37 pm


5% per month.
That is 60% per annum.
That is right up there on the ridiculous-shit-o-meter.

geek_oclaf, May 16, 12:29 am


Exponentially increased with each & every penalty & interest added.

Penaltys & interested added ON TOP of the previous penaltys & interest & all added on top of the original amount.
$479.3Mil worth of penaltys & interest ON TOP.
$5.7Mil PLUS $479.3Mil in penaltys & interest

How many ways do I have to describe how stupid the situation has become.

Some of you understand, others simply don't get it.

There is a point in a persons debt to income levels, where they will simply say "NAH" (not even a "yea Nah") just NAH!

geek_mrfxit, May 16, 9:01 am

Just to make my thoughts a bit clearer on this guy & his activitys.

May he rot in hell for eternity for his actions & have a specific bad mood dead Germany leader for a bed buddy.

I simply think the IRD intentions & maths system are all wrong.

geek_mrfxit, May 16, 9:05 am

It is much like the American propensity to handout 1000 year plus jail sentences. Stupidly ridiculous.
and serves only to make the masses feel better.

geek_king1, May 16, 11:12 am

Aha . thort this was J G Russell that was in the news . ;-)

An acceptable arrangement agreed to see payments & if met once paid wud prob have seen penalties remitted ;-)

Unfortunately it looks a bit like "Red Flag waved at a Bull charging" scenario now . ;-)

VG question though - what will IRD actually recover out of this even with attempting bankrupting him and putting him out of action prob for good ? ;-)

geek_tmg, May 16, 6:28 pm

Anyone seen instances of unpaid GST compounding in their travels ? ;-)

a darn sight more hefty increments than just income tax ;-)

geek_tmg, May 16, 6:32 pm

David (mrfxit):-

1. the penalty and interest must be charged by law. The IRD has no choice about that.
2. the Commissioner is required by law to use all means available to collect taxation that has been assessed but not paid.

3. Mr Russell has exhausted all his objection rights to the assessments of tax. He must now pay the amount for which he has been assessed.

4. penalties are imposed on any taxation not paid by the due date. That is done so as to punish those who make late payment. That differentiates those that do pay on time from those that do not. Thus the imposition of penalties is fair.

5. interest on unpaid tax is charged to compensate the Revenue for being out of pocket in respect of the unpaid taxes for the period up to the date of actual payment. That's fair. After all the unpaid taxes are, in effect, an unsecured loan until they are paid.

JGR deserves all he gets. No sympathy is due to him. He is evading his obligations. We all need tell him that. Maybe line up outside his home and picket the place until he does the right thing.

geek_mariner26, May 16, 7:48 pm


Agreed, but this has clearly been a merry go round of taxs on penaltys on interest on penaltys on tax on penaltys on interest . >>.

geek_mrfxit, May 16, 7:55 pm



I hear that the IRD's next effort will be a audit of the Tardus.

geek_namtak, May 16, 8:48 pm

Colin - an analysis of the cases decided whereby the JGR template was applied as a tax avoidance mechanism shows that approx $20,000,000 in income was derived by Mr Russell as fees (per various names/forms). He then proceeded to avoid taxation on that income by way of similar mechanisms to those utilised in his template cases. Thus, he "hid" all of his income. He has not paid tax on that. The Commissioner of Inland Revenue found out about that and assessed the correct amount of taxation. Read the cases that relate to the Russell assessments. Despite many objections of Mr Russell the Courts have decided that the assessments are correct. Mr Russell was wrong.
The non declaration of his income and the non payment of taxation by Mr Russell is grossly unfair to all law abiding persons - those who meet their obligation of filing their returns of income and pay their taxes by due date.
By any analysis Mr Russell is evil. He has reneged on his obligations and we have all had to pay more taxes because he has not paid his.
The matter is serious - not for jesting about or moaning. I know that we all hate paying taxes - but as a society we want certain things done for us and it is (in part) via the income tax system that our government raises the money that funds our "wants". We want - education, law and order, health, welfare systems for the disadvantaged, roads etc, power, water, etc etc.
I bet Mr Russell gets NZ Super - he is over 65. Now that comes from our taxes. But he has not paid his taxes! Perhaps he should give back his NZ Super?
So, I say - STICK IT UP HIM!

geek_mariner26, May 16, 9:48 pm

this should really be in Opinion & Politics now - its just a big waste of space in the computing forum.

geek_king1, May 16, 9:52 pm


Cool, NOT giving them any string /torches etc before they enter.
Gps won't work in there either.

geek_mrfxit, May 16, 10:13 pm


Bet ya theres a heck of a lot of computing going on to sort out his financial mess.

geek_mrfxit, May 16, 10:15 pm



Just a thought, store a couple of hungry aliens in the Tardus. The world would be a much better place with a few less tax collectors.

geek_namtak, May 16, 11:50 pm


Who's saying there aren't any already in there?
Pretty sure I already have a family of "Borrowers" resident.

geek_mrfxit, Nov 17, 11:16 pm

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