A couple who systematically defrauded the IRD over five years to the tune of more than $225,000 have been sentenced to home detention and community work.
Flagstaff residents Hong Sog Kim, 47, and Hyun Joo Chung, 50 – also known as Michelle Kim – appeared in the Hamilton District Court on Friday, where the depth of their deception was detailed by Judge Kim Saunders.
The offending related to Korean restaurants that Kim owned and managed with Chung in Hamilton and Te Awamutu.
Kim had been running a series of companies trading as restaurants since 2001. His management style came with a distinctive pattern: Once one company accumulated significant liabilities, it was liquidated and a new, almost identical, company formed to take over the running of the business.
The last three of these companies – Korean Minsokchon Hamilton Restaurant Ltd, NZ Minsokchon Ltd, and MJ Kitchen Ltd – used an accounting firm to meet their PAYE and GST obligations and to prepare and file income tax returns between April 1, 2009, and March 31, 2014.
Kim deliberately didn’t tell his accountant about the income he received from his cash sales. He pocketed the cash and used it for personal expenses, or, to a lesser extent, minor business expenses or staff wages.
Over the five-year period, Kim was estimated to have understated the net income of the businesses by about $252,870 – causing a loss to IRD of about $115,730.
Similarly, not mentioning those cash sales in at least 22 GST returns over that time period resulted in an understatement of GST or around $64,570.
And Kim also employed staff who were paid either wholly or in part with cash – and, again, this was something that he did not pass on to his accountant.
Based on a conservative estimate of two staff working 13 hours each week at minimum wage, it was believed Kim paid at least $25,210 less PAYE than he was supposed to.
In total, his evasion was at least $205,510.
When his subterfuge was uncovered, Kim said he was fully aware he had hidden his true income, however, he believed he was paying too much tax already.
Chung was charged with giving false information on her personal taxes. She significantly misreported both the income and expenditure the family was receiving and incurring in her 2010, 2011 and 2012 tax returns.
As a result, she obtained $25,948 in Working for Families tax credits to which she was not properly entitled.
The pair were charged with tax evasion, to which they pleaded guilty.
Their counsel Phillip Cornege said they were remorseful and determined to pay back what they could. However, Kim would soon be declared bankrupt and it was likely Chung would be, too. They had been fully compliant with their tax obligations since their offending was uncovered in 2014.
The Te Awamutu restaurant had been sold and they were also looking to sell the Hamilton one, he said.
The pair also had a letter of apology for the court.
Kim was sentenced to eight months’ home detention and ordered to pay $4000 in reparation.
Chung was ordered to undertake 180 hours of community work. She was also sentenced to 12 months’ supervision, and has to pay $5000 in reparation.
It wasn’t the first time Chung has made news for failing to meet her obligations.
Central Hamilton Min Sockchon Restaurant in Ward Street got a 15-day notice from Hamilton City Council health inspectors in August 2015 after multiple failings were discovered.
These included cleaning issues, pest control, food storage, food protection, hand-washing, a lack of registration and the condition of appliances.
Speaking to the Waikato Times under the name Michelle Kim, Chung said: “We obey what they need.”
“If we don’t [comply], they just come until it’s fixed.”