Let’s talk about tax.
Or more particularly let’s talk about tax, debt and approach to law changes.
Twenty plus years ago I came back to New Zealand a little bit pregnant. And before 1992 – unless you were in the public service – pregnancy meant (job) resignation. A stage up I guess from marriage or engagement meaning resignation but pretty antediluvian even with today’s – Is Jacinda having a baby? – eyes.
Parental Leave had come in two years before I came back but couldn’t apply to me as I had left a job in the UK – not New Zealand. I was also more than a little over being an accountant – I was young what can I say – and fascinated by economics. Again young.
So decided I would use this time to retrain as an economist. I mean seriously how hard could raising children be? Again young. And of course in reality studying was a blissful break from domesticity – not the other way around.
One of the super perks of studying was the Student creche. Super high quality childcare; very reasonable pricing and super flexible. Why sure Andrea: Tuesday 10-1; Thursday 3-5; and all day Friday is completely fine. Please pay by the hour. One child or two?
And at that creche there were two types of mothers – yes mothers; men appeared only occasionally. There were the middle class married women – like me – late twenties early/ mid thirties doing post graduate work or retraining and then there were the late teens/early twenties single women who were at university for the first time.
The young women had a number of things in common:
- Straight A students;
- Determined and resourceful;
- Highly motivated; and
- Dirt poor.
The other thing they had in common is that pretty much all of them were lying to WINZ in some form. Part time undeclared untaxed income was very common as was parental financial help. I don’t remember extra flat mates but I am sure that was in the mix. Because resourceful.
But all of this just meant that they could have their kids nits treated as I did, pay rent and eat. Although I do remember one of them brightly telling me that just eating potatoes for a week was an easy way of managing when unexpected bills came in. Right ok.
So in other words they were all Metiria. And the actual amounts of money involved were absolutely trifling. $20 or $30 a week max for a relatively short period of time. But it was the difference between sinking and not sinking. Swimming didn’t come into it.
Of course this was when there was a training incentive allowance to help with creche fees. And while it was post Mother of all Budgets the relative value of the welfare system was more than it is now. So I guess the current generation of young women just don’t go to university. Social Investment anyone?
And from time to time I run into them. Also like Metiria they are now professionals, (re)partnered and have other (step) children. Taxpaying, respectable pillars of society.
Now into this discourse has come Lisa Marriott’s seminal work on how we as a society treat tax evasion v welfare fraud. And I have nothing to add to this. Coz yup she is right. Nailed it.
But the two things I would like to add to the conversation – assuming there still is one now Jacinda has arrived – is a bit of a comparison with how we treat tax debt and how we treat widespread tax non-compliance.
In the early days of the last Labour government changes were made to the rules governing tax debt. Basically the intent was to get the department to calm the F down in terms of collecting tax debt. The rules were changed so that debt will not be recovered if it:
- is an inefficient use of the Commissioner’s resources or
- would leave a taxpayer in serious hardship.
And note the all important or. Not only should the Commissioner not pursue debt when there isn’t a bang for the buck but even when there is – if it would be unkind. At least these are the rules that apply to Working for Families overpayments.
But looking at some of the cases taken by WINZ, clearly these criteria are not in their legislation.
The other thing that made me realise how differently tax is treated to welfare are situations where there is widespread non-compliance. Either through a misunderstanding with how the law applied; wilful blindless; or a desire to put the past in the past; the law can be changed to make the illegal legal. And at times retrospectively.
Because they are doing it already; not in the forecast; can’t audit our way out or taxpayer friendly. The latter of course meaning friendly to specific taxpayers rather than friendly to taxpayers as a whole. Examples include:
- GST registration for body corporates was made optional. Of course meaning will only register if can get refunds;
- Use of tax pooling was allowed in circumstances that weren’t previously allowed for in the legislation;
- Canterbury Earthquake employee accommodation allowances were specifically made tax free;
- crews on super yachts income was made tax free;
- The contingent liability associated with conduit relief was extinguished.
Now these are just a few examples. Most tax bills contain versions of these. And all have good reasons behind them and help make the tax system breathe. I am comfortable with – pretty much – all of them.
But all were at some stage against the legislation. In all cases, at some stage, some people were ‘incorrectly’ on the wrong side of the law. Usually individually or cumulatively with quite large amounts of money at stake. Far more than a trifling $20/ week.
But rather than ruthlessly enforce the ‘incorrect’ legislation; the legislation changed. It changed following representations made to Ministers and officials by affected parties. In the same way I see welfare advocates make similar representations. The only difference is that the tax advocates get listened to. Because structural imbalances.
So even though tax and welfare are mirror images of each other, this is another case where public policy talks out of both sides of its mouth. And unfortunately as there is little or no overlap between the two worlds; joined up government just means easier detection of welfare discrepancies.
Now finally in case I have been a little too subtle:
To all the people baying for Metiria’s blood – did you ever do babysitting; lawnmowing or car washing when you were younger and not put it on your tax return? I know that is me.
Well that is what tax evasion looks like. We committed a tax crime. We lied to Inland Revenue. FFS #WeareallMetiria.
Should we fall on our swords. No. We should get on with our taxpaying lives. And section 176(2)(b) – the bang for buck provision – quite correctly stops the department from chasing us.
Shame the same approach can’t be taken to Welfare.
Andrea
Let's Talk About Tax NZ 
Perhaps, Michael, we should consider how else things might have turned out.
What if Metiria had done everything by the book but her child got sick a lot, failed to thrive, got into drugs and crime? What if she were unable to complete her studies and had to remain on a benefit much longer than she did? What would we think of Metiria then?
Poor people simply cannot win in this society, all the more so if they are female and indigenous. And if they assume anything other than a grateful and groveling attitude, they get the stick for that too.
As Andrea points out, we ALL live in glass houses when it comes to the law. I’d like to see government ministers who bend or outright break the rules suffer the public condemnation Metiria has, for acts committed as a young mother trying to keep food on the table and better her family’s situation.
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I can’t believe the Greens response to this …. with the article your wrote you are saying that other people cheat in other areas so cheating when it involves benefits when times are tough is ok.
It has never been, nor should it be ever ok to lie to get extra money from a benefit or tax!
I am a little sad, that the response wasn’t simple … something like “it is not ok to lie to get more money from a benefit, as an elected representative i should not have declared this before standing and I apologise to the NZ people for this” …. wouldn’t that have sounded better than trying to justify lying to get the the benefit, which you have tried to do with this article.
It is a sad day for New Zealand.
Mitch Martin
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Whilst it is clear there is different treatment between tax evasion and benefit fraud, which you point out could be to do with the relevant legislation, there is a difference in what people do. To commit evasion by omitting income “only” requires someone NOT to do something (e.g. not recording some cash sales) then not paying tax on that, however, to obtain a benefit someone actually has to do something (such as complete a form) saying they are entitled to a benefit and ticking the declaration box as being true and correct. Knowingly getting money you aren’t entitled to is not the same as saying here’s my self assessed income. What would your argument be if the situation was about GST refund returns filed knowing the claim was deliberately wrong in order to get a tax refund? What is the difference then? Genuine question, not trolling.
another thing is the Tax Admin Act specifically provides for reduced penalties where someone voluntarily discloses. Would be interesting to know if the various benefit Acts have similar provisions,
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Thank you for your comment.
It is true tax evasion involves ‘omitting’. Although often returns are still filed but with a reduced amount of income shown. I see this as the same as ticking an incorrect box or saying 2 flatmates when there were 3.
Or not including sales to get a GST refund.
I am not sure they are much different in practice. Where nothing is filed at all, I would argue that for grownups – not the kids doing babysitting- that is as much a conscious decision as ticking the wrong box.
And you are quite right about reduced penalties. They are reduced to zero with a voluntary disclosure. No clue about welfare legislation. Arguably that is what Metiria did with her speech. Made a voluntary disclosure.
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In practice, I think IRD might treat someone filing a false GST return claiming a fictitious refund different to someone filing a GST return and omitting sales. The former is likely to be considered under the Crimes Act for using a document for pecuniary advantage whereas the latter might be under the TAA for evasion. Personally rather be defending the latter and not the former!
There are quite a few cases which make this distinction, especially when the sentencing occurs.
I guess my point is that there are different types of offences which are called evasion for tax purposes where the fiscal effect is the same….tax not paid of $100 is the same as tax refunded fraudulently of $100
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What’s the golden rule? Those who have the Gold makes the Rules.
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Not to forget the 20 per cent discount (three-quarters of a billion dollars) afforded to the major banks with respect to their breaches of our ‘Rule of law’; http://www.noted.co.nz/currently/politics/metiria-tureis-good-deed-in-exposing-kiwis-hypocrisy/
And of course we were told that was a “very good result”.
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And to be fair it probably was. Because what was being weighed up was the banks ability to keep appealing and the risk of losing it all along the way.
Factors that don’t apply in welfare cases.
But the same tests apply to both. So equality before the law. What’s not to love.
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And hence “corrupt” political processes should be called out. It is the levelling-down that disconcerts me – not so much in your post particularly, but across the political spectrum. It is a bit like defenders of Trump running lines about “hasn’t so and so done something similar?” Perhaps, but it doesn’t excuse either sets of behaviour.
(And altho I’m not trying to seriously run this argument, some opponents of the welfare system would see it as systemic law-change to favour individuals and groups who just happened to be endowed with that other key resource – lots of votes).
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Interesting perspectives. I wouldn’t put myself in the “baying for blood” category, but I am astonished that there is no sign of contrition whatever. And I’d be just as annoyed about someone loudly boasting of cheating the tax system (or, in fact, apparently being totally relaxed about an MP not cooperating with a Police inquiry). It was the law. She might not have liked the law, but the rule of law matters a lot.
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I think after almost 2 decades of watching -and at times actively facilitating-law change for well resourced individuals and groups; I have a different take on the ‘rule of law’.
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