Cheats not treated equally in NZ

NEW ZEALANDERS were probably surprised by the recent blaze of publicity about former Auckland Heart of the City chief executive Alex Swney who pleaded guilty to evading nearly $2 million in tax.

White-collar tax evasion cases rarely attract the publicity that violent crimes or even benefit fraud seem to.

Yet the Tax Justice Network, a British-based organisation, estimates up to $7 billion in tax could be evaded in New Zealand each year, and that does not include legal avoidance. Google the word ‘‘google’’ if you don’t know what legal tax avoidance is.

In the year ended March 31, 2012, $1.2b of evaded tax was detected by the Inland Revenue Department. This included high-level evasion of the type Swney committed, as well as low-level stuff such as tradespeople doing nondeclared ‘‘cashie’’ jobs.

There is speculation that Swney could face jail for his crime, but he should be thankful he’s not a benefit fraudster.

According to research carried out by Lisa Marriott, associate professor of Victoria University’s School of Accountancy and Commercial Law, we treat tax evaders very differently to benefit fraudsters, even though they are engaged in the same activity of ripping off the taxpayer.

In the year ending March 31, 2013, the amount of tax evasion actually detected in this country was $812m.

In the same period, detected welfare fraud was only $26m.

But no prizes for guessing which group of people were targeted by the media and ‘‘kicked in the pants’’ by John Key and Paula Bennett. Imagine a United States president saying that the world needs to do more to reduce the road toll in Syria, while quietly ignoring the terrible war currently raging there.

According to Marriott’s research, about 5 per cent of all beneficiaries are annually investigated for fraud but only 0.05 per cent of taxpayers.

Is that because welfare beneficiaries are 100 times more dishonest than taxpayers? Each year about 60 people are prosecuted for tax evasion yet more than 11 times that number are done for welfare fraud.

If Swney does receive jail time, he should consider himself unlucky. In 2011-12, the average amount for a serious tax evasion offence (Inland Revenue only prosecutes the most serious offences) was $287,000 yet offenders had only about a one-in-five chance of receiving a jail sentence. The average amount a serious benefit fraudster diddled was only $67,000, yet they had a 60 per cent chance of being thrown in the slammer.

I won’t even go into the argument that some benefit fraudsters use their ‘‘criminal’’ gains to pay debt or feed their families while tax evaders often spend the money on buying mansions or overseas trips.

So don’t be too surprised if what looks to be a serious tax evader does not get sent to jail, when a small-time benefit fraudster is hauled over the coals.

Late last year in Wellington, a beneficiary accused of illegally claiming less than $50,000 over a 10-year period was subjected to a relatively long and expensive jury trial which probably cost more than the amount recovered.

So will Swney have to pay back the nearly $2m of tax he has evaded? According to Marriott, a whopping 14 per cent of legitimate tax debt is written off, yet less than 1 per cent of welfare debt.

Despite movies portraying our tax department as absolute bastards, it seems taxpayers are treated far more sympathetically than welfare recipients.

Recently, 150 of our richest citizens were investigated by Inland Revenue and were made to pay an extra $72m in tax. Were they demonised by the media and ministers for their lax and, in some cases, devious behaviour? Yeah right.

The legal system and the state should treat people equally yet they don’t.

So should we send more tax evaders to prison? That’s a tricky one as I’m pretty sure jail is a waste of time whether your collar is white or blue. However, next time you hear the word ‘‘bludger’’, you might like to imagine 30 people with white collars driving flash cars for every single beneficiary walking to the dole office.