Tax evasion costs the Government up to $6 billion a year. Photo / APN
A short quiz to start.
Times are tough and the Government is seeking all possible sources of income to balance its books. Does it put the most effort into tracking down:
a) Those estimated to cost the country between $1 billion and $6 billion a year
b) Those owing a total of $2.6 billion
c) Those owing $591 million
d) Those from whom $68 million - a figure likely to be the tip of the iceberg - has been clawed back in the past three years
e) Those costing $23.4 million a year.
Surprisingly, the correct answer is "e".
The largest of the above amounts - $1 billion to $6 billion a year - is the amount calculated to be lost to government coffers through tax evasion each year; $2.6 billion is the figure estimated to be owing in child support, with more than 800 fathers earning more than $100,000 a year owing millions in child support. The $591 million figure is the sum owing over three years in unpaid fines and reparation.
The $68 million is the amount the Inland Revenue Department has recovered from property speculators over the past three years.
The total amount of unpaid tax not yet detected is unknown.
The $23.4 million figure is the cost of benefit fraud in the past year. Yet, it is people on benefits who bear the brunt of public opprobrium.
Recent research also confirms that the legal system treats beneficiaries more harshly than tax evaders.
In a pilot study comparing three years of tax evasion and welfare fraud, Victoria University lecturer Dr Lisa Marriott found welfare fraud was significantly more likely than tax crime to be prosecuted, even though the sums involved in tax offences were far larger. In 2010, it was calculated that tax evaders cheated New Zealand of up to $6 billion.
Benefit fraud involved an average of $70,000 and the offender had a 60 per cent chance of being jailed. Tax evaders, with an average fraud of $270,000, had only a 22 per cent chance of being imprisoned.
On February 20 this year, Associate Social Development Minister Chester Borrows announced new measures - not to crack down on the $2.6 billion owing in child support or the money lost through tax evasion, but to "prevent, detect and catch welfare fraud".
So it is not surprising that a UMR Research survey released last month found New Zealanders believed beneficiaries had now become the most discriminated-against group in the country.
The same applies in other nations.
In the United Kingdom, a report titled "The blame game must stop - challenging the stigmatisation of people experiencing poverty" was issued in January. It records how people on benefits are stigmatised and blamed for their poverty, being labelled "scroungers", skivers" and "shirkers".
The paper reported on a study which found that between 2005 and 2011, more than 60 per cent of articles in tabloid newspapers about benefits were negative, the figure for the Sun being above 80 per cent.
The negative messages about British beneficiaries have contributed to a totally false picture being constructed in the public mind. For example, a poll in January last year found that the public estimated that 27 per cent of the social security budget was claimed fraudulently, when the actual figure was 0.7 per cent.
Similarly, while many people believed unemployed people were shirkers, the statistics showed 70 per cent of unemployed people found work within a year.
The United Kingdom's "tax gap" - the gap between what the tax department thinks it should receive and what it receives - is £30 billion a year, £5 billion of it lost through tax avoidance.
Yet in Britain, as in New Zealand, it is beneficiaries who politicians single out for criticism.
The "blame game" British report found this stigmatisation resulted in people on benefits feeling like failures, thinking they did not contribute to society and were despised by the community.
As a result, some people did not take up benefits to which they were entitled. In Wales and Scotland, for example, some children preferred to go hungry rather than receive school meals.
People do not choose to be on benefits. The current, net unemployment benefit in New Zealand for someone under 25 is $170.80 a week and the rate for those over 25 is $204.96. The net weekly payment for sole parents is $293.58. Even when people are eligible for additional payments, they face a grinding struggle to get by.
In addition, the legal tests for benefit entitlement can be complex. This is particularly the case in relation to the domestic purposes benefit, which is available only to those not "in a relationship in the nature of marriage". The definition of that phrase has been debated in numerous court cases and there is as yet no clear definition.
I have dealt with many cases in which the law has been incorrectly applied by Work and Income New Zealand.
So it is particularly concerning that so much public and political criticism is directed at those in need who receive this benefit.
Instead of focusing unjustified criticism at the poorest people in the community, who are struggling to get by on inadequate incomes, let's put more effort in to ensuring that the most well-off in New Zealand pay their fair share.
The report last December of the expert advisory group on solutions to child poverty - "Solutions to child poverty: Evidence for action today" - contained a list of 78 recommendations for addressing child poverty in New Zealand.
The cost is estimated to be between $1.5 and $2 billion a year - less than the amount owing in child support and probably less than the amount of tax evaded every year.
If people who choose not to pay the tax for which they are liable instead decided to start pulling their weight, there would be enough money to stamp out child poverty.
Catriona MacLennan is a barrister and the presenter of Know Your Rights on Sky channel 89.
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