A large-scale tax fraud involving migrant workers has fleeced New Zealand of about $30 million.

Six people have been prosecuted, and a further 50 are under scrutiny as the Inland Revenue Department cracks down on the racket, discovered in the horticulture industry.

Investigators have found evidence of people using false identities, fake companies and bogus invoices to evade tax.

Many of those involved are from India and other parts of Asia, and it is believed some have come to New Zealand specifically to take part in the scam.

The IRD's investigations are centred on the Tauranga-Te Puke area as well as Hawkes Bay and Nelson-Marlborough. The kiwifruit industry has been a particular target.

The IRD's field delivery group manager, Martin Scott, said the department had expanded its inquiries as a result of information obtained from recent prosecutions.

"Once you are in dealing with these sorts of cases, other names come up and it's like following a trail," said Mr Scott.

The amount known to have been defrauded in the Tauranga region in the past two years is $14 million.

The nationwide bill is not known, although some believe it is about $30 million.

The Weekend Herald has learned of cases where people have flown to New Zealand and used false passports or driver's licences to set up horticultural contracting businesses and obtain IRD numbers.

The fraudsters employ gangs of immigrant workers to work on orchards, earning tens of thousands of dollars without paying GST or PAYE, and leave the country before authorities catch up with them.

Three of the six cases which have gone to court have involved people claiming refugee status.

One woman was arrested at the airport as she was trying to leave the country.

The problem has highlighted the reliance the horticulture industry has on immigrant workers.

Many in the industry say they cannot get New Zealand-born workers, and labour-intensive tasks would not get done without immigrants.

This made speaking out about the tax evasion difficult because it risked depleting the industry's workforce.

A board member of the newly formed Kiwifruit Contractors Association, Mat Johnston, said people were limited in what they could do even if they suspected someone was acting illegally.

"We can go on the internet and see if they're a legit company, but that doesn't tell you things like whether they're paying their GST and PAYE."

He said it was important for the industry to tackle the problem.

"We have got to clamp down on these guys, or contractors like me who are doing it legitimately are going to get fed up and walk away."

Another industry source said the problem was affecting legitimate contracting businesses.

"Good workers are being poached because the [fraudsters] can pay more than I can," said the source. "But they aren't paying tax, and they pay their staff folding cash."

One orchardist said he knew of otherwise legitimate growers who were working with the fraudsters to claim additional business expenses.

The fraudsters would provide an invoice for fake work - often $50,000 worth.

The orchardist paid the fraudster, who cashed the cheque and returned most of the cash to the orchardist, minus a fee of $1000 to $2000.

Nicholas Dutch, a lawyer who acted for two of the accused, said his clients were merely part of the chain and were recruited to take part in the scheme.

He refused to elaborate or explain who masterminded the rip-off.

Mr Scott said the IRD had not found evidence of an organised ring, but any links would become obvious as the investigations continued.

Many of those involved believed their crimes could not be detected because they were using cash.

But Mr Scott said the IRD had a number of ways to identify the fraudsters.

At one point, IRD auditors obtained copies of every invoice received from contractors by packhouses and kiwifruit orchards in the Te Puke area.

Mr Scott said the IRD looked at the industry as if it was a pyramid.

"At the base you've got people who are really trying to meet their obligations, a bit further up you've got people who are saying, 'Shall I or shan't I?', and then you've got those who don't want to.

"Our audit resources are targeted very strongly at those who do not want to."

-NZ Herald