Inland Revenue has issued a rare formal warning to New Zealand’s horticulture sector, naming cash payments to workers, false invoices and layered contracting arrangements as practices it says pose a significant risk to the integrity of the tax system.
The revenue alert, released on Thursday, sits at the serious end of the department’s public communications. Revenue alerts are issued infrequently by the Commissioner of Inland Revenue and are used to flag significant or emerging tax issues rather than to deliver routine reminders. This one is aimed squarely at the growers, labour contractors and subcontractors who get fruit and vegetables from the orchard to the packhouse.
The numbers behind it are modest in dollar terms but pointed. In the year to 30 June 2026, Inland Revenue opened around 130 investigations into horticulture businesses, involving $7.2 million in discrepancies. Forty-five of those cases are still open. Three people involved in the sector were sentenced to home detention during the year on tax evasion charges.
The department set out the behaviour it is seeing. Workers are being paid in cash. Contracting arrangements are being built in ways that obscure what is actually happening. Obligations under the schedular payment rules, which require tax to be withheld from payments to certain contractors, are not being met. Inland Revenue also said it is aware of arrangements where “false invoices were created to obscure the true nature of transactions”, which can result in the under-reporting of GST, PAYE and income tax.
That last point matters more than it might first appear. A false invoice is not simply a bookkeeping error. It creates a paper trail that lets one business claim a GST deduction for a supply that never happened, while the entity that supposedly made the supply either never files a return or disappears. Inland Revenue said it will decline GST registration applications from entities that are not carrying on a genuine taxable activity, including those it believes have been set up mainly to issue invoices. It also flagged the misuse of exemption certificates, which allow some contractors to be paid without tax deducted at source.
Because of the concern, the department said it is increasing its focus on growers, contractors and subcontractors, and will investigate anything suspicious. It is also stepping up action to pursue outstanding debt in the sector and will use a range of powers to collect it. Where it finds evidence of offending that is not tax related, it said it will consider sharing information with other regulators and enforcement agencies, including police and the Labour Inspectorate at the Ministry of Business, Innovation and Employment.
That referral pathway is the part the industry will be watching. Tax investigations and employment investigations have historically run on separate tracks. An alert that explicitly contemplates handing findings to the Labour Inspectorate turns a PAYE audit into something with a much wider reach for a contractor who is also underpaying or misclassifying staff.
Horticulture New Zealand chief executive Kate Scott said the sector was committed to protecting the rights and wellbeing of all workers. She told RNZ that growers “operate in a complex and dynamic supply chain that includes a range of partners, including contractors and service providers”, adding that the organisation works “hard to ensure our growers are well-informed about their tax and employment obligations, and we continue to engage constructively with Inland Revenue and the Labour Inspectorate to lift understanding and support compliance across the sector”.
This is not the department’s first move on the sector. In June 2025, Inland Revenue said it had found $45 million of undeclared tax in the horticulture industry over the previous 10 months. At the time it had close to 100 active audits of contracting firms and had imposed mandatory withholding tax requirements on a number of labour contractors. Departmental spokesperson Tony Morris said then that alongside paying people under the table, “IR is seeing cash sales not being reported correctly”. He also said most growers do the right thing, and pointed to the recovery from Cyclone Gabrielle, rising compliance costs and labour shortages as pressures on the sector.
Read together, the 2025 campaign and this week’s alert describe a department that has moved from auditing individual firms to warning the whole industry. The escalation is notable given how well horticulture is otherwise doing. The Ministry for Primary Industries has forecast horticulture export revenue to rise 7 percent to $9.5 billion in the year to 30 June 2026, driven by record kiwifruit and apple volumes. Kiwifruit alone was forecast to grow 16 percent to $4.8 billion, with apples and pears up 6 percent to $1.3 billion. The full picture is in the ministry’s Situation and Outlook for Primary Industries reporting.
The structural reason the sector keeps attracting attention is the way labour is bought. Harvest demand arrives in a narrow window and disappears again, so a large share of picking, thinning and packing work is bought through contractors rather than hired directly by the grower. Once a job passes from grower to contractor to subcontractor, the person actually paying the picker can be several steps removed from the business that owns the fruit, and the records that would show who was paid what become correspondingly harder to follow.
The commercial consequence is straightforward. A contractor who pays in cash, skips PAYE and does not account for GST can quote a lower price per bin than one who does everything properly. Growers choosing between quotes are not always in a position to know which is which, and the compliant operator loses work to the one that is cheaper only because the tax has not been paid. Inland Revenue’s alert effectively tells growers that choosing the cheap quote without asking questions is no longer a neutral act.
For growers and packhouses, the practical takeaway is to check that contractors are registered, that schedular payment deductions are being made where required, and that invoices match work that genuinely happened. Inland Revenue has said it is looking, that 45 investigations remain open, and that the results of its enquiries may not stay inside the tax system.
What do you think? Is Inland Revenue right to put the whole sector on notice, or does this unfairly tar growers who are already doing the right thing? Leave a comment below and let us know.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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