Employers should be prosecuted for not passing tax on

Paul Little writes:

If you are one of those people whose employer hasn’t been ponying up their contribution to your KiwiSaver fund, you might be wondering about your retirement plan – such as, will you have one.

It was reported last week that $29.3 million in contributions and penalties is owed to KiwiSaver by employers who have not been passing on workers’ contributions, deducted at source, or not paying their compulsory 3 per cent contribution, a figure, it’s worth noting, that is a meagre third of what Australian employers must contribute to their workers’ retirement.

Of that $29 million, some of it will just be paperwork errors, and some will be deliberate decisions not to pay.

In the first case, they are effectively stealing from staff who would presumably be shown the door were the situation reversed. Employee contributions, however, are Government guaranteed; employers’ contributions are not.

Naturally the Government isn’t interested in making good the money delinquent employers don’t pay – that would reward delinquency. The alternative would be to pursue them through the justice system, but the amounts in many cases will be so small this would not be cost-effective.

I agree it is effectively theft when an employer deliberately doesn’t pass tax payments from staff on, and instead spends them on other activities.

A great example of this is this case from 2011. This nasty employer didn’t even pass on the PAYE from the staff. And they never got prosecuted for it, despite the large amount.