$2m tax bill for career criminal

A Christchurch man awaiting sentence for running an organised burglary ring has been hit with a tax bill of nearly $2 million for failing to give the Government its share of his illegal income.

Peter Lloyd Machirus, 62, is in custody on 20 charges of receiving stolen goods while he acted as a ringleader for a crime gang that targeted houses under construction.

It was the latest offending in a crime career dating back more than 20 years.

While Machirus was being tried on charges uncovered by Operation Rhino, one of the biggest covert investigations run by the Christchurch police, he lost his legal challenge against tax liabilities dating back to the early 1990s.

Machirus found there was no escape from the tax authorities, who assessed his liability at $100,000 but have since beefed it up to more than $1.9m through penalties and interest.

The officer in charge of Operation Rhino, Detective Sergeant Stuart McGowan, said Machirus' reputation as "an old-time criminal" was such that he was a specific target of the police when they investigated an upsurge of construction site break-ins over five years from 2000.

"It's fair to say that the intelligence and information we had available focused around him as being the principal and very much the driver of what was taking place," he said.

"The value of the property was certainly in the hundreds of thousands. There has been a significant decrease in burglaries of this type once Operation Rhino was terminated in February 2005."

In court, prosecutor Pip Currie described Machirus and one of his co-accused, Vincent James Clayton, as "at the top of the crime pyramid" when she successfully opposed bail pending sentence on the charges.

A spokeswoman for the Inland Revenue Department said privacy provisions prevented the claim against Machirus being compared to others, but there was a special unit to pursue tax debts from gangs, organised crime and similar illicit groups.

"All income, regardless of where it is derived from, is taxable. This means there is no requirement for any taxpayer to declare whether the income they have returned is from legal or illegal sources," she said.

"The department does not distinguish between illegal or legal income. However, any person who knowingly evades the assessment or payment of tax commits a criminal offence."

Inland Revenue's tax claim predated Operation Rhino by several years and was lodged in 1997 for alleged criminal offending by Machirus dating back to 1983.

It originally claimed Machirus owed $175,000 in unpaid tax and $532,000 in unpaid GST, but later reduced the claim to $16,000 in tax and $84,000 in GST because time bars precluded tax debts before 1990 and because of losses Machirus was able to set against his income.

However, with penalties and interest since 1997, his debt had increased to more than $1.9m.

In the High Court in Christchurch, Justice Ronald Young said Machirus "is, on his own admission, a criminal" but disputed his liability to pay tax and GST on his illegal activities, which augmented his legitimate income.

The debt had been based on an estimate of income from illegal sources that was then reduced by a quarter in line with the practice in a similar tax case.

The judge said it was now contended the discount should not have been made because "the bulk of the illegally produced income by Mr Machirus was from bookmaking rather than theft, burglary or fraud".

Machirus claimed tax was wrongly levied on illegally obtained income, but his failure to prove the source of the income led the Taxation Review Authority (TRA) to reject his challenge.

It was the authority's decision that Machirus challenged in the High Court, where he claimed he was denied a fair hearing and had his rights breached by being denied access to documents he said would have helped refute his tax liability.

The judge rejected Machirus' claim as variously unproven and baseless, and he allowed an appeal by Inland Revenue that reinstated GST debts that the TRA had ruled were time-barred.