Crackdown in the Fields: IRD Uncovers $45 Million in Undeclared Tax from the Horticulture Sector
Inland Revenue (IRD) has ramped up its compliance efforts in the horticulture industry, uncovering more than $45 million in undeclared tax over the past 10 months. While the majority of industry players follow the rules, IRD has revealed several concerning practices that are contributing to widespread non-compliance—particularly among labour contractors and cash-based operations.
The Key Issues at Hand
According to IRD spokesperson Tony Morris, many growers are doing their part correctly, but the issues often lie with labour contracting firms. These firms are frequently engaged to supply seasonal or temporary workers, and in many cases, the payments made to these workers are in cash. IRD is seeing increasing evidence that some contractors are using convoluted business structures to hide these payments and avoid tax obligations.
This practice not only evades tax but also has broader social impacts. Labourers who are paid under the table can end up illegitimately claiming government benefits, while also dodging child support or student loan repayments. This puts additional strain on government systems and creates an unfair playing field for compliant businesses.
Audits, Prosecutions, and Withholding Tax
In response to these practices, IRD has intensified its audit and enforcement activity. The department currently has nearly 100 audits underway and is pursuing both growers and contracting firms who fail to comply with tax obligations.
One of IRD's key countermeasures is requiring labour-hire contractors to deduct withholding tax directly from payments to workers and forward that tax to IRD. This helps to ensure income is declared and taxed appropriately, reducing the opportunity for cash payments to go unreported.
Tony Morris explains that where non-compliance is found, IRD is not hesitating to pursue enforcement through audits and legal action. These efforts are part of a broader campaign—now in its third iteration—designed to clean up practices within the sector and promote long-term compliance.
Collaboration Across the Sector
To support the industry in meeting its obligations, IRD is working closely with industry bodies such as Hort NZ and Zespri, as well as with other New Zealand government agencies. These collaborative efforts are aimed at ensuring that growers and contracting firms are informed, aware, and supported in their compliance efforts.
The industry’s heavy reliance on migrant labour and seasonal workers, coupled with the widespread use of cash, makes it particularly vulnerable to abuse. By increasing scrutiny and offering education, IRD hopes to ensure that workers are protected and that businesses are competing fairly.
What This Means for Businesses
If you're operating within the horticulture sector or working with labour-hire companies, it is essential to review your tax and employment practices. Make sure that:
All payments are properly recorded and declared.
Withholding tax obligations are being met.
Labour contracts and employment structures are transparent and compliant.
The message from IRD is clear: non-compliance is no longer being overlooked.
Need assistance reviewing your processes or preparing for an IRD audit? Contact Tax Professionals today. We’ll help ensure your business stays compliant, protected, and positioned for long-term success.
📞 Call us on 09 625 0035
🌐 Visit www.taxprofessionals.co.nz