Consider the following scenario. Ermine and Jamil are partners in a business venture, importing an assortment of expensive goods from overseas including perfumery, high end cellphones and home appliances. The business has been operating since 2010. Making profits is everything to the two partners. However, they failed to file tax returns for all the years they have been operating. They also failed to pay withholding PAYE taxes, other withholding taxes and GST. The business was not even registered with the Belize Tax Service Department (BTSD).

One day, a BTSD survey team came across the business. On checking with the office, they realized this was an unregistered business. They reported this to the Supervisor of Audits who sent an audit team to assess the situation. When the team reached the business premises, they noted that there were several late model vehicles parked in front, plus delivery vehicles and others which likely belonged to customers or staff. The building itself was quite large, and a quick assessment of the value put it over $1 million. There appeared to be a sizeable warehouse at the back.

The lead auditor asked to speak to the manager, showing her job ID. A front desk clerk appeared a little troubled at first, then advised that she would get the manager. After a full 15 minutes, she finally returned to say that the manager would be there in a few. After another five minutes, the manager failed to show. The clerk asked if they wanted to return another day, but the lead auditor insisted in interviewing the management that same day. The clerk got on her cellphone and could be seen sending a text. Soon after, there was the sound of a vehicle driving off. Then the clerk apologized and said that, unfortunately, the managers had to deal with an emergency and had left.

The on-spot audit team called Head Office and informed the Supervisor of Audits as to what had transpired. The Supervisor advised them to stay at the premises indefinitely until the managers returned. Furthermore, she sent over two other uniformed officers and they were instructed to post themselves across the business compound including the main office, the warehouse and the rear of the compound. Two hours later, managing partner Jamil returned and asked to speak to the lead auditor. First, he tried to play the guilt game, accusing the Tax Department of invading the business premises and intimidating his staff. Furthermore, he could not understand why Belize Tax Service Department was not going after the foreigners who were the real evaders.

The lead auditor was sufficiently experienced not to take this bait and calmly insisted on getting down to business. Jamil then changed his tactic and began to coax the tax auditors. He was having a hard day, so therefore he was frustrated. He had a sick father in the hospital. He really did not know much about the tax laws but was just about to go in and register. By the way, what were the kinds of phones being used by the tax staff, because he had the latest models and could get them all good deals.

Again, the lead auditor recognized the attempted bribery and gently steered the conversation back to the business of an interview to assess the tax situation. Seeing he was making no progress, Jamil called Ermine and told her about the problem. She immediately stormed over in her 2019 BMW X-5 and began berating the tax officers. She wanted them off the premises immediately and she would call her Minister buddy to deal with the situation! The Belize Tax Service Department did not know how well she was connected! Some people would lose their jobs. She then gave instructions to her staff to close for the day and she would tell them when to return, after she took care of the problem.

The lead auditor asked to see some basic documentation such as sales register receipts, Sales Ledgers, payroll records and invoices. She angrily snapped that they had none of that crap and that they were barely surviving. She then informed them that she knew her rights and that she would call her attorney. The Tax Department could speak to the attorney if they wanted anything else. Then she escorted them off the compound.

The audit team returned to Head Office and prepared reports immediately. The Audit Supervisor apprised the Director General. After reviewing all the reports, they realized that a tip had come into the office three weeks earlier that this business was in the habit of smuggling cash, jewelry and cellphones in compartments in stoves. The tip off had come from a disgruntled employee.

They had to plan the next move.

Questions:

1. What do you think of the approach taken by the tax auditors? Should they have done anything differently?

2. What is likely the reason behind Jamil and Ermines behavior?

3. What kinds of protocols would you put in place for your auditing staff if you were the Tax Audit Supervisor?

4. What likely offences have been committed by the businesspersons?