Businesswoman Ellena Tavioni-Pittman faced eight charges of aiding and abetting her company Tav to deduct PAYE from employees’ salaries which was then used for other purposes. Tav also faced eight charges of knowingly applying PAYE deductions and diverting the employee’s money elsewhere.
Tav owes Inland Revenue a total of $513,449 for unpaid PAYE, (the former) Turnover Tax and VAT. The PAYE component of that debt amounts to $167,500. Tavioni-Pittman herself owes Inland Revenue $88,327 for unpaid personal income tax
Chief Justice Sir John Hugh Williams noted during the sentencing on Wednesday morning that the prosecution of Ellena Tavioni-Pittman was “back to front”.
“She is charged with aiding and abetting the company; to commit these offences there is usually a secondary liability in criminal law, but here, where she is the sole director, the person who ran the company, organised its financial affairs, signed the PAYE returns and dealt with wages, she effectively becomes the principal offender and the company’s liability falls away.”
Defence counsel David McNair had suggested that Tavioni-Pittman, who set up the company in 1987 when she was 19 years old, was out her depth when it came to tax matters and unfamiliar with tax obligations. He said the Collector of Taxes had been inactive over a number of years.
But CJ Williams did not accept this reasoning, saying it did not take deep knowledge of tax matters to recognise the fundamental difference between tax obligations arising from a company’s trading turnover, and the need to deduct from employees’ salaries and pass those deductions on to government.
The Chief Justice noted that the company was “deliberately managed so that it used other persons’ money for its own purposes”, and that concerted attempts had been made by the Collector to ensure Tav and Tavioni-Pittman complied with their tax obligations.
These efforts had been ongoing since 2000 and had included discussions, interviews and civil proceedings which resulted in settlement and agreement to meet the arrears. The agreement had not been honoured. The court heard that Tav and Ellena Tavioni had previously been served notice under section 218 of the Company’s Act which deemed it unable to pay its debts.
CJ Williams said Tavioni-Pittman and her company had failed to follow directions given in court by Justice Grice late last year and provide details of the company and her personal financial position.
“This created a difficulty knowing what the financial position of the company and Tavioni might be, a difficulty compounded by the fact that neither has provided tax returns since 2010.”
In response to McNair’s submissions to have fines imposed at a level which would not force the company to collapse, the Chief Justice said that not having any company or personal financial information made it difficult to determine what type of monetary fine the company could bear.
CJ Williams also noted submissions by McNair that Tavioni-Pittman had entered business at a young age and had been successful over the years despite not having any particular business training.
He made mention of McNair’s previous statements that Tavioni-Pittman’s objective over the years had been to keep her staff employed. McNair had also raised the issue that the company had cash flow fluctuations because payment for goods shipped overseas had been spasmodic or did not reach the company.
He suggested that the fines should recognise the restricted economy of the country and the need to maintain 20 or so staff employed.
Tav was audited by Inland Revenue Senior Auditor Andrew Forbes in April 2015. He discovered that gross wages of $933,101 had been paid to staff from which PAYE deductions of $64,406 had been made. There had been no payment “of any kind from that sum to the Collector at that stage,” said CJ Williams.
Tavioni-Pittman was interviewed on at least two occasions on these matters and accepted that it was she who signed the wages cheques and PAYE returns. She also accepted that the company had failed in its legal obligation to pay its employees deductions to the Collector saying that they had been used for nett wages and for paying creditors.
CJ Williams said in Forbes’ opinion Tav “is probably trading while insolvent and it is likely that the Collector will be issuing a notice against the company under section 218 of companies act and follow that up with a winding up petition.”
The Chief Justice said records showed that Tav owed over $500,000 in taxes and this was being paid off fortnightly $500 instalments – “…but the payments are insufficient to reduce the core amount.”
In summing up, CJ Williams said the prosecution had made the point that the repetitive offending had occurred over a 10-year period, “which is accepted as being intentional as shown by the plea of guilty.”
The prosecution submitted this had impacted on the government’s ability to provide goods and services and implement programmes. The offending also jeopardised the Tav employees – up to 26 at one stage, with their taxation status.
CJ Williams said the position of the company’s employees tax position was imperilled by the repeat offending of 48 months over 10 years and “could be challenged by the Collector on the basis they haven’t paid their tax.”
“There is a desirability not to impose fines that might jeopadise the future of the business, but it is difficult to make any assessment in that regard given the dearth of financial information concerning the company and Ellena Tavioni and the fact that no tax returns have been filed.”
He said the failure to pay PAYE was just as deliberate in 2006 as it was in 2015.
The Chief Justice fined the company $1000 for each offending month, double the minimum fine of $500. Tavioni-Pittman was fined $1500 for each month of offending, triple the minimum fine.
McNair told the court that an application would be made on his client’s behalf with the Court Registrar for payments to be made in instalments.