Thinking about Phil Heatley slapping those two bottles of wine on the taxpayers’ credit card reminded me of something.
I was at dinner with my partner, a family friend of hers, his wife, and a couple of others. At the end, my the friend was very insistent that he pay the bill on his credit card and we repay him later, rather than just splitting the bill there and then.
‘Why does he want to do it that way?’ I asked my partner.
‘He always does it’ she explained ‘He gets the receipts and claims it as a business expense. He gets to write it off against his profits and claim the GST back on the meals. He does it so much he ends up getting a GST refund from IRD’
Dodgy right? Well, not only dodgy but unethical and illegal too. I understand it’s common practice among some contractors and others who own a small company and are registered for GST.
They claim all kinds of personal expenses as business expenses for the purposes of claiming back the GST. Buy the kids a computer, business expense. Buy a second car, business expense. And so on.
You can claim so much GST back that your GST claims outweigh your liabilities and you get a GST refund payment from IRD.
The IRD website is replete with examples of people who were caught having ripped off IRD (and ultimately us) for tens of thousands of dollars of GST refunds doing just that with GST claims for fictious or non-business expenses. And you know it’s just the dumb tip of the iceberg of tax cheats – the ones that got caught.
What does a hike in GST to 15% mean for a GST cheat who’s getting GST refunds? An extra $220 cash for every $10,000 of GST ‘business’ expenses they claim. Quite a tidy packet.
The higher GST is the more unscrupulous people can rip off honest taxpayers like you and me with this GST rort.
The Right’s excuse for dropping the top tax bracket from 38% to 33% is that tax cheats, wealthy bludgers, are spending money to avoid the top bracket anyway, so we may as well let them do it for free. Now, we see that the GST hike will benefit tax cheats as well.
Just another reason to axe Key’s tax package.
(Oh, and we paid our bill ourselves.)