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Audit idea draws fire from owners
Written by Mark Lineberger   
Wednesday, 24 December 2008 12:55

Faced with the biggest economic downturn in years, Camp Verde Town Manager Mike Scannell said he thinks the town should hire an accountant to help make sure local businesses are paying their fair share of taxes.

But some local business people have been vocal in their opposition to the idea, claiming it’s an unfair harassment of hard working people who are already suffering due to slow business.

The Town Council thinks the idea needs some time to sit with the public before taking action on the matter. The measure was tabled until January at last week’s council meeting.

Scannell said he feels people need to be educated about what the measure would and wouldn’t mean.

The state government distributes what it calls the model municipal tax code to cities and towns across Arizona, basically a recommendation of what it considers to be effective tax rules for local government.

The auditing program has been the responsibility of the state to make sure businesses everywhere are in compliance with tax laws. This new measure, if passed by Town Council, would give the local government the power to audit its own businesses.

It wouldn’t create any new taxes, Scannell said, and would level the playing field, making competition fair for businesses that already follow the rules.

Camp Verde gets most of its income from sales taxes; the council has had to make drastic budget cuts in the current economic slowdown, the most severe in years. While the auditing job is currently the state’s responsibility, Scannell said he hasn’t seen a state auditor in Camp Verde since he came on the job in October 2007.

Scannell said he’s done everything he can to juggle the amount of money the town spends. The town has eliminated its Housing Department, instituted a hiring freeze and slashed funding to the Camp Verde Chamber of Commerce, among other things.

So far the town has managed to avoid laying employees off. That won’t be the case if the economy gets any worse, Scannell said. With options on the spending side exhausted, Scannell said he turned to the revenue side.

The rate of compliance with town business and tax codes is “abysmal,” Scannell said, and having an auditor could help make sure the town is getting its share.

It’s not necessarily a matter of business owners deliberately not paying taxes, said Donald Zelechowski, a Scottsdale accountant who performs this service for several other municipalities, it’s often just a case that business owners might not be aware of all the details of the law.

“A lot of people just don’t know if they need to be paying taxes,” Mayor Tony Gioia said.

Ginger Mason, owner of Mason’s Jewelers, said the word audit has got people scared.

“It instills fear,” Mason said. “Especially when we are worrying to see if we’re going to make it from day to day.”

The type of audit in question doesn’t mean auditors with badges will come kicking down the doors demanding to see the books, Zelechowski said.

Instead, an auditor would send out letters informing businesses about what their responsibilities are and inspections would be a “minimal desk-type of audit.”

Not everyone at last week’s council meeting seemed convinced. Charlotte Floyd, who runs the Treasure Box in Wingfield Plaza, said she felt like this would be an intrusion.

“I don’t need a bunch more paperwork because [the town] hired someone to check on us,” Floyd said.

Scannell again pointed to low rates of compliance, and said he didn’t care one way or the other if Town Council chooses to enforce its codes, but said if the town doesn’t want to enforce its rules and continue to provide a certain level of service to citizens, the rules shouldn’t be on the books in the first place. The manager pointed out paying sales tax should have nothing to do with the viability of a business that operates above board, because the money collected goes directly from the consumer to the business to the state and then back to the town.

According to paperwork submitted by Zelechowski, the program would cost less than $10,000 the first year with an expectation for the town to recoup as much as three times the investment based on his experience, or at the least, to break even.

Zelechowski said while the law allows the town to go after money they discover might have been owed in the past, he recommends against it.
“I think the program should start from here and into the future, not the past,” Zelechowski said.

Scannell told council, and people in attendance at last week’s meeting, that he sees the program as “compliance through education.”

“I’m trying desperately to save jobs,” Scannell said. “Not to have people thumb their nose at the system.”


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