ALLEGED FALSE INCOME TAX RETURNS

Chronicle (Levin), 5 June 1948, Page 6

ALLEGED FALSE INCOME TAX RETURNS

Press Associationj

Long Cross-Examination Of. Tax Inspector

(Per

WELLINGTON, June 4. A denial that iJress publicity regardiag the purolig.se of an expeusive launcli by , oue of the defeudants haa prompted .mjs investigations of ali'airs' of George aiid Gfeorge and its directors Arthur Leonard Roediger George anu Clilford Delpay Andrews George, was uiade by an Income' Tax Dopartment witness yesterday. Witness, a fonner chief iiLipectojr of the Land and Jihcome Tax . Department (II. H. A. Young) was under cross-exami nation by Mr. W. E. Leieester vvho appeared for the defendant uompany and its directors. The case, vvhich involves a total of 10 charges alleging false returns of income from 1913 to 1917, is being heard by Mr. H. J. Thompson, fS.M., in the Magistrate 's Court. Mr. W. R. Birlts is representing the Commissioner ot Taxes. =. Young said he had seen press reports of the purchase of a launcli but the investigation was begun by hira 011 lns own initiative as a routine matter. He had no speeial instructions from liis depart mental superiors. Some davs after he Iiegan liis investigations he had askt'd A. L. R. George about his purchase of the launcli and subsequent investigation in Auckland had conlirined George 's statements. Witness told Mr. Leieester that Jie began his investigation sometime last August aua ceased about the middle of November. He had reeeived the cooperation of the directors and the books were readily made available including the casn inward books and casli outwaru books. There were cash outwaru books for eacli year but oulv oue casn inward book for all the years he was invest'gating. He liad found that invoices for the firm 's operations were available oniy back to July and had suggested to the directors in writmg that thev sliouhl be kept for five years as that wouhl assist his department. When he returned from his holidays on Eebrurary 0 he had fouiul that the casli inwards books except for the current year had beeu destroyed. It was said that thev had been disposed of to muke room for future records. Witness would not agree with a suggestion by Mr. Leieester that the directors could have taken it that the investigations were finished in Noveiuber. Witness agreed he had written to the firm at the time asking for a written reply to certain questions. A letter dated Deecmber 1 wliicli conveyed the firiu's reply aad reaclied liis ottice in. the Department few days before C'hrist- . nuis. Mr. Leieester: That is not unusual in j the Department? Witness: No, but I mav have been away in the meantime. When he returned 011 February b witness had been surprised to fiud that the vouchers he wished to check had also been destroyed. Mr. Leieester: When vou referred to Ihis in your earlier evidence did you wisli to coiivey to the Court th-at there was something being concealed — That is a muller for the Court, I think. , lu reply to a further question by Mr.. , Leieester, witness said that in law the onus was 011 the taxpayer to prove Ihe" correetnes.s of his returns, but there. was nothiug in the Land aud Income Tax Act making it incumlieiit 011 eompanies to ke'ep their vouchers. He had found, however, that it was usual for eompanies to keep theni for > four or five years. Mr. Leieester: Does the Department investigate riie accounts of all flrms or just pick some out i Witness: I11 the present sliortage of 1 staff it is not possible to get round them all. Most commercial firms realise that thev are liable to lnspection at any time. Witness told Mr. Leieester that in the November letter to the iirm he had suggested that some of the cash saies were short stated. No particulars oi these were given and the Department was under 110 obligation to give them. After seeing the records he would say some of the cash payuients could not bd traced. He could not point to any particular instance but the cash for payments had come from somewhere aua the Department could not accept the George 's explanatioii of personal savings. j After (letailing year by year tlie profit returned by the company from1940 to 1 940 and' obtainiug « witiie-ss 's agreement with the diiVerences of a few pounds 111 some cases, II r. Leieester said thev totalled £7.4,332 011 which £55,. >97, equal to 70.0 per cent or 14s Ud 111 the £, tax was paid. Witness: I'robablv in Hue with other eompanies of the same size. Witness said that witli the investigations of private eompanies sharehohlers ' personal aJl'airs were always iinestigated. It was strange if the directors had loose cash at their homcs j as the.v stated they had not applied it to reducing the tirifi's overdraft and so save bank charges. Mr. Leieester: 1 put it to you, there are thousands of people wlio keep large sums of monev and keep it under the bed ratlier tliau in the bank and that your department would like to get down on it for tax purposes. Yes, and I think we all ltnow the reason. Witness agreed that since import licensing was introduced there had been shortages of certain commodities. Where sucli goods were available for cash, hrms were eiititled to purchase them. He had seen three of the travellers from whom George aud George had made purchases for cash. They would not agree that the purchases were to the extent George and George ha! stated, .however. They did not agree bv a long way with George aud George 's records. There was 110 legal obligation on the directors to keep complete records of their private aifairs and sucli were rarely met, said witness. lndividual directors might have made savings in the depression years when they continued to draw good salaries, bouus salaries and directors' fees. Witness agreed that there was nothing sinister in the payments by- Miss WiniI'red ( ieorge to ( 1. T), A. George '0T1 hin

return from tlie war of the balance ot the salary drawn by her while replaeing him as a director in his absence. It seenied feasible nOw, but in the light of the incomplete knowledge witness liad thought the -explanation a sham. He was not awai'e if. gift duty had been paid. ' . Mr. Leieester: I suggest you entered uppn this investigation with a feeling that the directors had been misusing the flrm's money? No. But when I had seen the books and found vouchers missing. Mr. Leieester: 1 put it to you that from the flrst you have taken the attitude that tlie directors were guilty untii they were proved not guilty. No. But in this case there is proof needed. They could not convinee anybody without vouchers. Mr. Leieester: If the directors' personal funds were in fact used to pav for goods purchased they were entitlod to reimbursement? Yes. But they should produce vouchers in- support. Ke-examined by Mr. Birks, witness stated that the retention of records was discussed with the Iirm in November. They could be kept and were kept by some other lirms for other purposes than tax checks. The l'riee Tribunal, for in stauce, might require them. At the .request of Mr. Birks, witness suminarised the grounds for "the Department 's act ion as follow: — (1) A combination of cij'e-umstances, including missing vouchers. aud alleged purclqises ifoi- which money we/it fnto/the private' accounts of the directors; (2) When he interviewed the lirjn he did not .get the satisfaction he should have got; (3) thefact that b'oth the Georges contended that they saved loose money over a perlod of years; 14) the opening by oue of t'he Geofgesihf 'a bank account in; another bank t:hiai£4.t'hat usefLjKv, the| iirm.; (5). -the faot. (b ha t the firm carrieT a bank overdruft df the directors had the savings •thev stated. At. the couclusien of witness' evidence Ihe Court utlqonriied to a'clate be lixed by the IMhgistrate and eounsek