Fraudulent
GST invoices totalling $9.5 million which generated personal benefits exceeding
$2.3 million for two Wellington tax agents resulted in convictions for Barrie
James Skinner and David Ingram Rowley, trading as Tax Planning Services Ltd.
This followed a raid
on Tax Planning’s offices in April 2010 by a dozen Inland Revenue
officers. They spent twelve hours
searching through the company’s records and took copies of computer hard
drives.
Inland Revenue
suffered an initial loss of $3.1 million because of the scam, but recovered
most of these losses after reversing the deductions and GST input credits
claimed by Tax Planning clients. Skinner
and Rowley were convicted of multiple offences for dishonest use of documents
to obtain a pecuniary advantage, perverting the course of justice and knowingly
providing false information to Inland Revenue.
The High Court in
Wellington was told Mr Shaan Stevens, a former chartered accountant with
Guinness Gallagher Accounting Ltd, was jointly charged with Skinner and Rowley
in respect of 13 charges of dishonest use of a document for which he received
kickbacks totalling $8500. Stevens
pleaded guilty before trial to these 13 offences, together with others, and was
sentenced in November 2011 to ten months home detention, 150 hours community
work and ordered to pay reparations of $121,850.
Evidence was given
that the tax fraud was engineered by Skinner and Rowley using tax clients who
were looking to minimise tax payable.
Clients typically had a large tax bill to pay but no cash to meet the
liability. Over a five year period,
Skinner and Rowley issued false invoices to 27 tax clients for fictitious
“consultancy” or “sub-contracting” work supposedly done at the client’s
request. These false invoices inflated
taxable expenses for clients, driving down taxable income and also supported a
GST refund. Tax clients were assured
that the transactions were a legitimate method of tax reduction. Most clients had no understanding of tax
accounting and went along with what Tax Planning was recommending. Those clients seeking some explanation of
what was happening were usually told that they had purchased a tax loss
business or third party debts as part of a scheme to reduce their taxable
income.
In a typical
transaction, the client received a tax invoice for services (which were never
to be provided) and then paid the face value of the invoice, usually into Tax
Planning’s trust account. Within a
couple of days, about two-thirds of this payment was rebated back to the
client. The remaining one-third went to
Skinner and Rowley or interests associated with them.
Tax Planning then
adjusted the tax client’s tax returns to claim the full value of the invoice
for income tax and GST purposes. The
scheme benefitted Tax Planning clients because the combined economic effect of
the income tax deduction and the GST input credit exceeded the amount of cash Skinner
and Rowley retained.
Skinner and Rowley
were convicted for dishonest use of documents arising from the false invoice
scam.
When Skinner and
Rowley became aware that Inland Revenue was approaching clients investigating
tax irregularities they set about trying to convert the false invoices into
legitimate transactions: clients were approached and told the invoices related
to work done on the client’s behalf for the purchase of apartments or car park
licences. Dummy contracts, held
unsigned, were generated to support a story that there was a concrete
transaction behind each consultancy invoice.
Forensic analysis of Tax Planning computers identified that the dummy
contracts were created years after the date of the supposed transaction – this
despite attempts by Rowley to manipulate the computer’s master clock tracking
transactions. Tax Planning clients
expressed surprise and bemusement when learning they had supposedly purchased
interests in Wellington apartments or car park licences.
These attempts to
concoct legitimate consulting transactions led to convictions for perverting
the course of justice.
Skinner and Rowley
were also convicted of knowingly providing false information when filing their
personal tax returns.
The court was told
that Rowley under-declared his income by some $296,000 for the five year period
2006-10; Skinner by some $1.06 million for the same period. At a time when Skinner had declared income of
only $390,000 he had spent just over two million dollars on his credit cards,
including nearly $725,000 on overseas travel and over $550,000 on food and
accommodation whilst overseas.
R.
v. Rowley & Skinner – High Court (20.07.12)
12.017