Scoop Election 08: edited by Gordon Campbell

Gordon Campbell on the different treatment of tax and welfare cheats

October 23rd, 2012

Hidden in amongst the usual holiday weekend filler stories – the road toll, the weather, the disgrace of Lance Armstrong etc – was a fascinating piece of research from Victoria University about the different way the courts treat tax cheats, compared to how they treat offenders who fiddle their entitlements to welfare. Even though the amounts involved tend to be much higher with tax evasion, the legal system treats welfare fraud far more harshly.

First, consider the amounts involved:

Tax evasion, that’s the deliberate act of not giving money to the Government that you should give to them,” says Dr Lisa Marriott at Victoria University. “And benefit fraud is the act of deliberately taking money from the Government you’re not entitled to.” Last year, tax evaders cheated the country of between $1 and $6 billion, while welfare fraud cost $39 million.

“The problem of tax evasion is at best case scenario 25 to 50 times the financial amount of welfare fraud, and at worst case scenario potentially 100 to 150 times the amount,” says Dr Marriott.

OK, and how do the courts respond in punishing the offenders?

The numbers tell the story. For tax evaders, the average offending is $270,000, and those found guilty have only a 22 percent, or one-in-five chance, of being jailed.

For welfare fraudsters, the average offending is $70,000, and those found guilty have a 60 percent chance of being jailed.

Or to put that another way: for tax evaders, the average offending is about four times as much, but they have about a third of the likelihood of receiving a custodial sentence. Clearly, it seems that beating up on errant beneficiaries is rife, and not only among politicians. The judiciary appears to be regarding cheating on tax as a more morally grey area, while treating the theft of far smaller amounts (on average) from the welfare system as a more serious crime with fewer mitigating factors. Thus, they seem more willing to jail welfare culprits – presumably, pour encourager les autres.

Is anything likely to change this situation? Hardly. Not, perhaps, when politicians and judges are themselves likely to be availing themselves of legal tax avoidance vehicles in order to minimize their own tax liabilities – in ways that, sometimes, only a Jesuit tax expert could detect as notably different in design and intent from a few of the more ingenious tax evasion mechanisms. Basically, welfare fraud is what poor people do, and thus seems easier for people on six figure incomes to demonise. Tax evasion, on the other hand, appears the sort of white collar criminal lapse that people more like themselves are prone to, which appears to render it easier for the judiciary to find grounds for compassion, even though the amounts involved are far higher, on average. It is otherwise hard to explain the startling disparity between the average amounts involved in the cheating, and the typical sentencing outcomes.

For obvious reasons, the Victoria University study deserves to be at the forefront of the ongoing public debate on welfare reform. Yes, Revenue Minister Peter Dunne has set aside more money to chase down tax cheats in the last couple of Budgets, but there has been nothing like the same public fanfare and allocation of resources that Social Development Paula Bennett has had at her disposal to wage the government’s current jihad against welfare dependency. That’s the real difference. Cheating on tax is being treated as a technical matter requiring a technical fix by IRD, without any related campaign of social stigmatization.

In stark contrast, cheating on welfare (and reliance on welfare per se) is being treated as a significant moral lapse, arising from bad social attitudes that are to be identified and openly deterred. In the process, the poor are being stigmatized, for political convenience. The judiciary should not be buying into the process. Yet until tax evasion is treated with the same (or greater) moral repugnance, the judiciary will remain locked in a 19th century time-warp when it comes to their different sentencing practices in these two realms. Welfare fraud is a crime, but it should not be the one that gets treated, relatively speaking, as a hanging offence.

ENDS

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    1. 10 Responses to “Gordon Campbell on the different treatment of tax and welfare cheats”

    2. By Ben on Oct 23, 2012 | Reply

      I wonder what difference – if any – previous convictions make to the punishment which is being doled out. (Pardon the pun.)

      Are there a higher number of previous (not necessarily related) convictions in the case of benefit fraudsters?

      What are the numbers when only first offenders are taken into account?

    3. By Jamine on Oct 23, 2012 | Reply

      What about when the MSD deliberately witholds(or fiddles) some legal entitlements from some eligible beneficiaries.
      Is this a type of welfare fraud?

      What about when ACC gets money from the govt ( full funding of a lifetime claim) meant for care, treatment and rehab of a patient, but then then ACC keeps the all money and denies the claim. Or is this just acc’s ‘operational procedure’ that I’ve heard so much about.

      Societies biggest fraudsters( are so big that they don’t even put welfare fraud on the map) must be laughing at how people are harshly judging the poor welfare fraudster.
      “Create some bloody jobs govt and stop picking on the poor( trying to give the big insurance companies the $delivery of our social welfare on a plate).”

    4. By Kelly on Oct 23, 2012 | Reply

      THANK YOU.
      The media is intrinsic in this process of framing both involuntary ‘poverty’ and the conscious refusal to pursue monetary wealth as deliberately deviant and therefore punishable, one way or the other. It’s not even about reviling someone for the alleged moral failure of ‘welfare dependancy’ (whatever the hell that is- AKA there are no bloody jobs) anymore; it’s about pinning red letters to those without the social and political clout to defend themselves. Bullying, because the choice of victim is not arbitrary, and completely cowardly. And based on the increasingly tenuous assumption that the perpetrators will never themselves be in a situation requiring the help and support of the community they’re so busily destroying.
      Viva democracy- with all this empathy, moral courage and rectitude everyone’s displaying lately, it’s really going places.

    5. By Jay on Oct 23, 2012 | Reply

      My childrens father and I separated amicably almost 16 years ago. He is currently in the middle of a family battle with his sister over the Power of Attorney currently being held by his sister which has resulted in him being thrown out of his mothers home, a number of trumped up assault charges, reports of him abusing his mother to Elder care and a fraud allegation to WINZ by his sister. This has resulted in an investigation into his benefit which has consequently affected me as he is currently living with our adult children at our House. 3 months later I have received a bill from MSD for the benefit I received when my youngest son was being treated for cancer 8 years ago and all family support even though I have told the investigator we are not a couple. Apparently they can make a decision to seek reparation before you are even found guilty in a court of law. Perhaps I would have been better to embezzle hundreds of thousands of dollars from investors at the firm I work for. In fact I think I would receive less of a sentence for murder or rape thank I will if I was to be found guilty in a court of law. How is it that the police need a truckload of evidence to arrest gang members, and drug addicts but MSD can decide without even speaking to my Children, any of my family members or even my ex husband that I am guilty of living in a relationship in the nature of marriage. Other than a brief stint back a few years ago I have always worked and paid my taxes, I have never had even a speeding ticket how can this be fair people!!!

    6. By tuhoe girl on Oct 24, 2012 | Reply

      What a very interesting read. I dare not throw my interpretation on it. Hey, for we are purporting to be ONE LAW FOR ALL, then I hope the people in positions of authority can give a honest explanation about this one, without resorting to Acts and Regulations and all that bullshit. They’ve certainly done their work on how to bamboozle those on benefit and ACC claims…. Alot of time and energy has been placed there to find “criminals”. Not a hell of a lot is being publicized about Tax Evasion. Benefit fraud gets front page coverage in our newspaper! Crazy bullshit…..

    7. By Scintilla on Oct 24, 2012 | Reply

      Can’t find the original post now, but Frankly Speaking listed all the mega-ripoffs perpetrated by the dodgy finance companies over the last year or two – vast sums of money! Add that excavation of shared wealth to the tax evaders’ pillage. This country’s been gutted.

    8. By clairbear on Oct 25, 2012 | Reply

      Wonderful thing percentages – I once was in a position to win a bonus. I worked for an american software company and they had a bonus system that worked on a percentage of salary base on the percentage increase in turnover that maxed at 35%. I remembered having the discussion with my Australian counter part whose bonus was set based on a 5% increase in turnover where as I had my bonus maxed at the full 35% because my office’s turnover had doubled – yes gone up by 100% I had increased our turnover from $1 million to $2 million where his office had gone from $100 Million to a mere $105 million. He was on a higher salary than me to be sure, but my bonus was still probably more than his.

      So the first rule is beware people who quote percentages, what they say, can mean just about anything. The second rule is beware people who talk about averages, without a good sample size, averages can also mean anything.

      Do we see any quantification between the contribution of evaders vs the quantification of the contribution of welfare cheats – no. So for example the evader under the progressive tax system may well pay heaps, but just managed not to pay heaps and heaps, whereas the cheats not only took but they also did not contribute anything.

      I am not saying there is not a real issue here – it is just that the author has maximised his arguments to make a specific point without telling the full story. If he would just balance the story out a bit more his points would probably be just as significant, but he seems afraid to do this as it might not quite suit his personal agenda and so he goes for a sensational “the numbers tell the story” without providing all the numbers.

    9. By Jamine on Oct 25, 2012 | Reply

      Clairbear it was not suppose to be “the full story” so when reading a brief take just your personal experience of what Gordon is saying,and what we all hear, feel and experience but be truthful with yourself.

      Your should’ve, for clarity, defined what you feel contribution is.
      Is it the development of a new GM crop that will cause tumors, a new metal on metal hip replacement that will cause complications, DDT,earning interest on inflation proof bonds, politics, developing a new system to cheat on trading? If you tell any of these people they are not contributing they may disagree.

      All wealthy people can’t habitually avoid tax AND then turn around and condemn the similar behaviour in poor people.
      The story is there in between the numbers if you read it

    10. By JUST REWARDS on Nov 7, 2012 | Reply

      Cheating is theft but as pointed out society is soft on tax fraud why because those who do it big time have to protect themselves and since the biggest evaders are the corporates who have the power to bend the rules the age old might will be right is the way they get away with it -they have the power to justify themselves by paying people to make them look good and they have a system which is designed to keep it all behind closed doors and they just make all the rules because they are in parliament and every other area of influence in society you can name because supposedly their worth is greater than their crime and thats how it goes where as the beneficiary cheat is totally exposed to the power of all that which is above them and its been the lot of the poor since probably the beginning of time so human nature is slow to change

    11. By Jamine on Nov 9, 2012 | Reply

      Real human nature has nothing to do with it.
      Human nature is generous, kind gentle and content.
      We have forgotten our humanity.

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