Damien Grant: Go softer on tax cheats - they are society's contributors

Just 380,000 individuals pay half of all income tax. Photo / Thinkstock

Are tax cheats the moral equivalent of benefit fraudsters?

Victoria University lecturer Lisa Marriott last year researched the difference in sentencing outcomes for tax cheats and beneficiary fraudsters.

Tax offenders are less likely to go to prison than benefit scammers. Of those who were sent to prison the average tax fraud was $800,000 and they enjoyed a 25-month sojourn, compared to an average benefit scam of $130,000 in return for a paltry 17-month stint.

Of those the IRD prosecuted between 2009 and 2011, only 39 went away compared with 48 for benefit fraud. Most convicted tax evaders were rorting the system, usually by getting false GST refunds. However, the real cost to the system is evasions that are civil in nature, such as the famous South Island surgeons Ian Penny and Gary Hooper whose creative accounting structures were unwound by the Supreme Court; or Andrew Krukziener who took $5 million from his company as a loan, and not as income.

The latest IRD data shows $5.5 billion in unpaid tax and that does not include tax undeclared by creative accounting tricks.

Labour MP Jacinda Ardern picked up on this when she challenged the government's crackdown on benefit abuse. However, were Marriott and Ardern correct in equating the morality of underpaying tax with defrauding the benefit system?

Just 380,000 individuals pay half of all income tax.

If you earn more than $80,000 you are in that group. Most tax is paid by businesses through corporate tax or receipted GST payments. Possibly 80 per cent of the country is taking more from the state than they are contributing.

If you are a net contributor most of your money will go to paying for the welfare of others.

Most of those who seek to reduce their tax obligations are net contributors to our society. The only complaints against them are they do not pay enough.

Beneficiary cheats, by contrast, are providing nothing to start with and seek to enrich themselves further by deception and dishonesty.

Judges understand this, which is why beneficiary cheats go to jail for longer, as they should.

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