This figure does not include possibly $700 million in fraudulent ACC claims.
ACC
is predicting a massive deficit.
The Serious Fraud Office with the assistance of the UK Government Counter Fraud Function calculated the extent of fraud in 2020. The report published in 2021 said that “If tax revenues were to be included in this estimation, the total cost of fraud and associated error loss could be as high as $12.97b a year”.
Inflation-adjusted, that could mean fraud and errors will cost up to $15.76 billion this year.
I believe the report is conservative. When GST was introduced, to claim GST refunds it was necessary to register with the Inland Revenue. In some provincial towns, tax registration increased by 10%. There are thousands of cash-only businesses.
World Economics estimates 10% of New Zealand’s economic activity occurs outside the formal sector. That would put our black economy at $27b.
Insurance companies say, the world over, that between 10% and 20% of personal injury claims are fraudulent.
You and I, as taxpayers, are not only paying our own tax and ACC levies, but we are paying for the fraudsters, too.
We will never eliminate fraud, but AI can examine every payment and every tax return.
The Government should be making eliminating fraud and waste a priority.
The 2021 fraud report would have come as a shock. The report found that while perhaps 5% of all payments were fraudulent, four Government departments did not detect any fraud.
The civil service claims to be taking the issue of fraud seriously but the evidence indicates otherwise. The Inland Revenue Department completed just 31 prosecutions for tax evasion in 2023-24 when tax evasion is estimated to be over $7 billion a year.
The gap between the Government’s rhetoric and action is enormous.
In three weeks, Elon Musk has done more to tackle waste in the Federal Government than our Government has done in more than a year.
The coalition’s spending, deficit and borrowing are all higher than under Labour.
Musk is moving fast for two reasons.
Musk and Trump know they have less than two years before elections when the Republicans are likely to lose control of the House of Representatives.
The coalition also has less than two years before our elections but here it has failed to create urgency.
Second, Musk is aware of how AI can revolutionise Government, automate repetitive tasks, respond to requests 24/7 and analyse vast amounts of data. In health, it can assist in diagnosing and reduce costs. In education, provide AI-assisted tutoring.
Under Labour, as education achievement fell, the Ministry of Education grew by two-thirds from 2600 to 4300. The ministry will this year still have about 1500 more employees than it did when Sir Bill English was Prime Minister.
While Singapore schools are using AI, TVNZ news reports our Ministry of Education is “monitoring” developments and is aiming to have AI in the curriculum by 2027.
No wonder Musk believes education in the US will be better without a ministry.
AI can be used to detect fraud and errors. Today, the IRD uses a computer program to detect anomalous returns for a human to inspect. While the department reveals information about the race and gender of its staff, it is silent on how many are qualified to conduct a complex audit. There aren’t enough tax specialists to audit all suspicious returns.
AI can audit every tax return. AI can audit every payment.
Thanks to the Chinese the cost of AI has just fallen dramatically.
There are privacy issues. The Australian Government has banned DeepSeek from any federal computer, but I predict privacy issues will be used as an excuse for inaction.
AI can do so much more than detect fraud.
Instead of setting up yet another department to focus on the increasing number on benefits, AI could detect from the first application those who are going to need mentoring.
I chaired, pro bono, an organisation that had an over-95% success rate in returning long-term ACC claimants to work. Our team could predict those accident victims, while they were still in hospital, who would need assistance to return to work. Not hard. A 55-year-old truck driver, whose accident means he cannot drive a truck, is going to need help to return to the workforce.
ACC would wait three years until the truck driver’s savings and confidence were destroyed before referring him to us.
AI can transform Government.
There must be a happy medium between Musk’s bull in a China shop and the coalition’s gradualism.
