Inland Revenue is pursuing Ethnik Krasniqi for $2.9 million tax covering six tax years on assessed income of $7.8 million. Mr Krasniqi has a colourful commercial career being bankrupted twice and subsequently claiming to be living variously in both New Zealand and Australia but paying no tax in either country.
Inland Revenue interest in Mr Krasniqi arose when investigating the tax affairs of a business associate, Roy Brown. It spent four years reconstructing their business relationship. Inland Revenue tracked payments from Mr Brown and associated entities into bank accounts owned by Mr Krasniqi, members of his family and family trusts. Inland Revenue also identified assets purchased with funds from undisclosed sources and living expenses funded again from undisclosed sources.
The High Court was told Mr Krasniqi was bankrupted in 1993, following the failure of a family manufacturing business. He later worked as a consultant, continuing to do so even whilst bankrupt again in 2003. His work included advising on property developments, primarily for his father Mazhar Krasniqi and two childhood friends: Roy Brown and Murray Smith.
When assessed as receiving undeclared income totalling $7.8 million, Mr Krasniqi claimed to be an Australian tax resident. Inquiries of the Australian Tax Office identified he was paying no tax in Australia, but brought to light payments into Australian bank accounts which were assessed as taxable in New Zealand. Amongst the assets Inland Revenue said were purchased out of undeclared income was a Range Rover and a property at Remuera in Auckland. When challenged, Mr Krasniqi said the Remuera property was a family home, an about-turn on his claim to be resident in Australia. The property was sold eighteen months after purchase, generating a profit of some $135,000. This was taxable since Mr Krasniqi was in business as a property developer. He provided no evidence that he or his family had ever lived at the address. He said the Range Rover was on loan, owned by Mr Brown. The $105,000 cost was treated as undeclared income. Mr Krasniqi provided no evidence the vehicle was on loan.
By the time his tax dispute came to a hearing, Mr Krasniqi admitted he was a New Zealand tax resident for the years in dispute, claiming the money received was repayment of loans made to Mr Brown. Justice Wylie said Mr Krasniqi provided no evidence of the fact or the terms of any loans. Inland Revenue’s investigation covered six tax years ending 2011.
Krasniqi v. Inland Revenue – High Court (14.08.18)
18.163