The elderly gentleman limps quietly into the room. As usual, there is a bit of a line, this is after all, a busy place, what with finding out what your government pension is, general confusion over what to do, and where to go to sign up for things. He hasn't been feeling well lately and is just about to go 65.

He really had hoped to work longer, after all he is a very good employee, always on time, always reliable. The last few years though the lifting really bothered his back, he just didn't feel as strong as he used to, pretty exhausted at the end of the day. His sister said, 'why don't you just retire? You have earned it. After all, you even get another pension besides the Government pension'.

He has saved a little money, but those two pensions sure are going to come in handy. He wasn't too happy when they started up the Bermuda National Pension Scheme, didn't know much about all that investing, but that extra now is going to help.

It's his turn at the window.

"What exactly am I getting for the government pension, monthly, Miss? $500 a month? That just can't be, I know I have worked enough years. I've worked all my life. I just don't understand ... seems that over the last few years a couple of my employers never paid in what they were supposed to. I know I got paid, but where is the rest of my money?"

Sound familiar? It's called payroll fraud.

Payroll fraud can be perpetrated in a number of ways, in a variety of forms, including pyramiding, employee leasing, paying employees in cash, filing false payroll tax returns or failing to file payroll tax returns.

Pyramiding of employment taxes is a fraudulent practice where a business withholds taxes from its employees but intentionally fails to remit them to the taxing authority. The business then files for bankruptcy to discharge the liabilities accrued, starts a new business under a different name and begins a new scheme all over again.

Sometimes, employers plead ignorance of the payroll filling system as the excuse used for filing false payroll tax returns or failing to file payroll tax returns. Misunderstanding of various sets of complex rules and regulations can happen. Government revenue agencies realise that compliance is confusing, and will adjust for some particular circumstances. However, blatant and consistent misfilings raises "red flags" and a monitoring system moves into place.

Many countries' Government Revenue Collection Agencies have harnessed the power of electronics for provision of mandatory payments. And times have changed; revenue agencies are much quicker and better at tracking payroll payments. Employers falling one month behind get hit with a large fine; two or more months behind, the agency moves to freeze business and personal accounts and garnish assets.

In some cases, any responsible person - the bookkeeper, the office manager, even a director on a non-profit corporation board - working in a business will be sought for payroll tax restitution regardless of whether they actually own the company. Revenue agencies are determined to get this abuse of public trust under control.

They mean business with dispensation of justice being pretty severe. In the United States, during Fiscal Years 1998, 1999, and 2000, nearly 86 percent of people convicted of evading employment taxes were sentenced to an average of 17 months in prison and ordered to make restitution to the government for the taxes evaded (plus interest and penalties).

Some recent significant cases:

On June 20, 2001, John Leroy Fischer, the owner of Global Communications, a company that installs cable and communications systems, admiited two counts of failing to pay over withholding $350,000 in taxes he collected from his employees. Fischer faces a maximum penalty of five years in prison and/or a $250,000 fine on each count.

On July 20, 2001, Dr. Joseph DiChiara of Niagara Falls, New York was sentenced to eight months in prison for health care fraud, failing to pay withholding taxes and possession of a controlled substance. He defrauded the Medicare system by writing prescriptions in the names of patients who never used the drugs. In addition to serving his prison sentence DiChiara must repay $40,000 in employment taxes to the US Internal Revenue System and $5,700 to Medicare.

Canada Customs and Revenue Agency announced on May 7, 2001, financial advisor, Jean-Guy Rioux was found guilty of tax evasion for failing to remit $1,215 in payroll deductions from his employees. He was fined $5,000 and given 12 months to pay, or face jail time of 18 days for each of the five offences.

In the United Kingdom, the proprietor of two butcher shops and his wife were found guilty of keeping false sets of books, thereby cheating the public purse out of ?464,748. He was sentenced to two years in jail; confiscation orders were obtained to recoup the tax lost.

As you can see, governments today take a very dim view of employers who fail to deposit their pension and payroll liabilities - their employees' money held in trust for placement with taxing and pension authorities. Persons who deliberately evade this tax cause honest responsible employers to pay more than their fair share, as governments are ultimately forced to raise levies on all businesses to take care of those who have been deprived. It is a burden for any business to administer a payroll tax regimen, calculating, collecting and remitting the correct tax for each employee on time, every time.

The "by the book" employer can also be placed at a real competitive disadvantage. The non-paying-tax employer can afford to undercut bid jobs because his/her overhead is lower, due in part to, albeit illegally, interest free loans and a readily available cash float. Conscientious employers who handle their obligations seriously and diligently need assurance that the tax system will be equitable and that tax evaders will be prosecuted appropriately.

Voluntary compliance remains the cornerstone of our tax system. Not only does non-compliance with tax laws threaten the stability of our tax system, but these offences hurt the economy, and our whole society. It almost always follows that those who short the payroll system also avoid other obligations; inadequate or no employee health insurance, little or no workers compensation and general liability insurance, property tax defaults, skimping on materials, poor repair jobs using inferior product components, mediocre or poor professional service, inadequate compliance procedures, inadequate or no job safety measures, and so on. Regrettably, these true stories abound. Cheating knows no economic, social, ethnic or cultural boundaries.

It is sad and disheartening to see this kind of theft perpetrated on honest, everyday working people. They are the real losers; many of them will never earn the salary their employers command, nor live their lifestyle. Even worse, these employers already aspired to the finer things in life, did they really need this extra money? When employees place their absolute trust in their employer, assuming he/she will do the right thing, and they do not, the employee feels powerless.

It is not easy to own and run a business these days. Respectable employers should be recognised as contributors to society's well being, because they have done the right thing. Employees, your responsibility is to know where your payroll tax and pensions benefits are each and every month. Whether the ultimate fine to your employer is the cost of an expensive dinner for two ($250) or your benefits fund the voyage of a luxury yacht, once the cash is gone, it is very difficult to get it back. Even when the business is placed under legal garnishment, legitimate employers and employees alike receive the ultimate indignity of having to pay again for the perpetrator's prosecution and perhaps, subsequent incarceration. Truly, aren't all working people worth much more than that?