Why does the State seem to pick on the little guy

System harder on welfare fraudsters than tax dodgers, even when the money involved is less.

There’s a sign as you come into Wellington that’s pretty hard to miss. It’s meant to be an ad for Victoria University, but it takes a minute to make the connection.

The billboard compares tax evasion and welfare fraud, which has been the basis of a significant and interesting piece of research by Associate Professor Lisa Marriott. This has always been a massive bugbear for me.

Since the moment I came into Parliament the way we have treated what is essentially two forms of loss for the state, has always seemed inequitable. Turns out that it is.

The amount of revenue the country loses via tax evasion sits at more than 30 times that of welfare fraud. Yet we spend more time and resources pursuing welfare fraud, we prosecute more people for it – roughly 1000 people a year in comparison to only 80 or so for tax evasion, and only 5 per cent is usually repaid when those convicted of welfare fraud are more likely to repay in full.

I remember this inequity hitting home when I had not long been in the role of justice spokeswoman. I was sitting in the back of a district court for a day when a woman was called in for sentencing. She was up on welfare fraud.

From what the judge set out, it was clear the women in question had made a series of mistakes with big repercussions. Her partner had been living with her on and off – she had tried to report it accurately each time but had failed, and now she was in the dock.

How many people who dodge paying tax find themselves in a situation where they’re pleading with a judge to give them a curfew that allows them to take their kids to sports practice? That’s essentially what I witnessed in the back of the courtroom that day.

And that’s my point. If we’re

If we're going to pursue lost revenue, do it equitably.

going to pursue lost revenue, do it equitably. In fact, why don’t we place a bit more priority on pursuing the big bucks? As I have heard our finance spokesman Grant Robertson say many a time, a well-functioning tax system is one that is fair, simple, and collected. There are imbalances in our system at present, and too many incentives to invest in the speculative rather than the productive economy.

But we’re also doing far too little on the ‘‘collection’’ side of the equation. We know, for instance, that there are multinational companies operating here who are diverting their profits overseas in order to pay little, or no tax here in New Zealand.

While it might be legal, it’s wrong, especially when it’s been reported that the most aggressive of these tax avoiders are making up to $10 billion in sales in our backyard.

Other countries have tackled the issue head-on with what has been coined a ‘‘Google tax’’. The UK, for instance, has created an incentive to pay tax domestically, by taxing diverted profits at a higher rate than the UK’s own corporate tax rate. Australia has moved, too.

Meanwhile, our Government seems to be waiting on advice, and has been for months, moving with caution and at a snail-like pace. Yet when it comes to the pace and investment in pursuing the welfare dollar, it’s a whole other story. Surely it’s time for a bit of equity.