Several reasons can explain the strategies of IRD. First of all, medium-sized restaurants often resort to such practices as paying wages and salaries to the registered personnel part-time workers because the profitability of these enterprises is lower, especially in comparison with larger eateries. If they force employees to pay PAYE, they will find it very difficult to recruit the staff. The thing is that the people who work in such enterprises often request cash wages.
According to existing legislation, the company is obliged to deny this request. The representative of IRD may believe that the management of medium-sized eateries is more inclined to comply with these demands of the employees. The thing is that this strict adherence to the rules will deprive them of the labor force since many employees will seek different jobs. This situation is particularly widespread in small and medium-sized enterprises, and especially restaurants since they often hire people on a part-time basis. Moreover, it should be noted that, unlike large restaurants, they cannot increase the amount of compensation paid to the employees because these operational expenses will not be affordable to them. This is one of the reasons why the Inland Revenue Department decided to focus on these enterprises.
Moreover, these companies can conceal some of their profits and this will significantly affect the bottom line of their income statement. Apart from that, if they fail to record some of their financial transactions, they will not be heavily penalized because the amount of the fine is dependent on the fraction of undeclared revenues. In contrast, such concealment will be more conspicuous in large restaurants; these attempts to conceal revenues will immediately attract the attention of the inspectors.