Inland Revenue v Nikao Video Hire Ltd [2012] CKHC 69; CR 579-590.11 (29 March 2012)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CRIMINAL DIVISION)

CR NO'S 579 - 590/11

INLAND REVENUE

v

NIKAO VIDEO HIRE LTD

Hearing: 29 March 2012
Counsel: Ms Henry for the Crown
Ms Rokoika for the Defendant

Sentence: 29 March 2012

SENTENCING NOTES OF THE HONOURABLE TOM WESTON CJ

[1] The defendant Nikao Video Hire is before the Court today having pleaded guilty to a number of charges in relation to VAT (5 charges) PAYE (4 charges) and failure to file returns (3 charges). That is a total of 12 charges.

[2] Ms Rokoika submitted that the three charges dealing with the failure to file tax returns were a duplication of those in relation to PAYE. I am satisfied though that that submission is incorrect. Having said that, I understand the background to the submission. It arises from the form of the informations drafted by the Collector which did not properly identify the relevant sections of the Act which were said to be breached. The Collector will ensure that such clarity is provided in future informations. Therefore I need to sentence the company in relation to all of the charges currently before the Court.

[3] I have had my attention drawn to two previous decisions of Justice Nicholson in relation to John Young Limited and Rarotonga Insurance Agency Limited. In the John Young case the judge was dealing with VAT breaches, and in the particular circumstances of the case, fined the defendant $100 in relation to the first charges, and $200 thereafter. His Honour said that these two figures were exceptions to reflect the parlous financial state of the defendant.

[4] In relation to the Rarotonga Insurance case, the judge was dealing with the failures to file annual returns and he fined the defendant in that case $2,000 for each year of failure.

[5] In this case, the Crown seeks fines which would be $150 in relation to the first breaches of VAT, and $300 thereafter. It seeks $1,300 per annum in relation to each of the failures to pay PAYE and failures to file returns. The total fines sought by it are $18,250.

[6] Ms Rokoika submits that the circumstances of her client are analogous to those in the John Young case. She has pointed to the difficulties of running a video hire business during the current recession. She has also pointed to piracy issues as impacting on her client's business.

[7] There is always a balance to be reached as between the need to penalise and deter breaches of tax legislation with the realities of the taxpayer's financial position and circumstances. Many taxpayers that come before the Court are likely to be in a situation similar to that of John Young Ltd where the defendant has failed to pay because it was under financial pressure. For better or worse, the tax collector gets the money last. The Court cannot, of course, countenance such an approach and there must be a fine that will deter. Equally, I need to be alert to the defendant's financial circumstances.

[8] I believe that in this case the approach taken by Justice Nicholson in the John Young case is an appropriate benchmark. Consequently there will be fines in relation to the VAT breaches of $100 for the first month and $200 per month thereafter.

[9] In relation to the PAYE failures the statutory minimum is $1000 for each relevant period. I believe that this would be an appropriate recognition of the offending in this case, so I fine defendant $1000 in respect of each of the four PAYE offences.

[10] I believe a similar approach should be taken in relation to the failure to supply income tax returns and I fine the company $1000 in relation to each of those three periods.

[11] In addition the defendant is to pay twelve lots of Court costs of $30 per charge.

[12] Ms Rokoika has raised with me the need to ensure that the fines are dealt with by way of instalment payments. I am told that the taxpayer's arrears are something like $75,000 and these are being paid off by instalments. Something like $2,500 per month has been paid to date, totalling $8,500.

[13] This indicates that it will take some time for the taxpayer to catch up on the arrears. It also illustrates that the Court should order instalments that can be met by the taxpayer. There is no point putting such a burden on the taxpayer that it completely gives up business. If that were to occur the Collector would be worse off rather than better off.

[14] I believe that meeting the fines by instalment payment over 24 months would be appropriate and I direct the Collector to set out a schedule of what payments would be required in order to meet that obligation. Ms Rokoika can then assist her client to set up an appropriate banking arrangement.

__________________________
Tom Weston
Chief Justice

Editorial Note: Derived from the Court's electronic records and believed to be correct and final.