Posts Tagged ‘tax avoidance’

A culture of tax evasion.

datePosted on 11:25, April 15th, 2016 by Pablo

I do not understand what the fuss is all about when it comes to John Key and the revelations in the so-called “Panama Papers.” So what if he and other Kiwi high rollers shield their incomes and assets from the IRD in assorted trusts, funds, investments and even shell companies? Isn’t it an axiom of capitalism that, as Donald Trump has openly stated, you try to avoid as much tax payment as possible? Forget all this nonsense about “paying one’s fair share of taxes.” Only rubes and idealists do that. Everyone else tries to minimise their tax exposure and the rich pricks just do so on a grander and more elaborate scale.

I say this because the entire NZ economy is riddled with tax avoidance. One of the things that struck me after I moved to NZ is the amount of cash transactions that are done with the explicit intention of avoiding tax. Almost every single tradesperson I have dealt with in the course of my time here has proposed a cash transaction that avoids GST, but more importantly, avoids traceable electronic or paper (cheque) financial transfers. And the offers of non-GST cash transactions are done without shame or concern; it is just part of doing business for many people and everyone knows it and acts accordingly based on their own circumstances.

If what I have seen in the small business trade and service sector is any indication, then it is reasonable to expect that such attitudes percolate upwards into larger corporate structures and repositories of wealth. Since these are too big to hide in a cash-only parallel market, the next best thing is to engage in tax evasion and income-hiding schemes whose complexity is based upon the ability of the tax authorities to uncover them. The move to off-shore trusts and the like is simply a matter of keeping one or two steps ahead of the law and three steps ahead of enforcement mechanisms. If those in government choose to structure the financial regulatory regime in such a way that it keeps the holders of wealth five to ten steps ahead of the tax authorities then, well, you get what you vote for.

The difference between the approach of NZ high and low rollers when it comes to tax evasion is in scale, not kind.

This is one reason why I believe that the Transparency International rankings that have NZ listed among the top three least corrupt nations on earth are rubbish.  Add to that the nepotism, cronyism, shoulder-tapping, sinecure swapping and insider trading of everything from personal and professional favours to board directorships to stock shares, and the picture of NZ is far less rosy and far more, let us say, “pragmatic.”  I am particularly critical of the TI indexes because not only are they mostly based on reputational analysis (mostly offered by those who stand to gain from gaming the system), but because I participated in a TI survey of NZ’s intelligence and defense forces and saw my scores (and those of some others) pretty much discarded in favour of higher scores offered by insiders that led to an overall TI assessment that NZ has the highest standard of professional integrity amongst the defense and intelligence services in the Asia-Pacific.

Even so, I am one of those who are a bit idealistic when it comes to taxes. I understand the concept of public goods and therefore comprehend the rationale behind taxation. In NZ I pay tax more readily at a higher rate than I did in the US because, among other things, I am not paying to support a huge war machine that in turn serves the interests of a taxpayer subsidised military-industrial complex. As a small business owner I feel the burden of taxation more heavily and immediately than the corporate moguls that run the nation’s largest firms and whose bottom lines rest on minimising two things: their tax liabilities and their labour force wage bills. Yet I try to believe that I am contributing my small bit towards maintaining a high standard of public education, health and welfare that will lead to future generations of productive and happy citizens (although my experience with NZ academia suggests seriously diminishing returns in that sector, and I have serious doubts that overall heath, education and welfare outcomes are on the rise rather than in decline as a result of nearly a decade of National government public policies).

In spite of these misgivings, I remain a residual idealist and want to believe that my contributions, when taken collectively with those of others, matter for the present and future well-being of NZ. But I do not expect others to share the same hopelessly naive view of how the systems works, and I therefore do not begrudge them trying to dodge the taxman as much as possible. Because in a country where market-reifying ideologies reign supreme in virtually every facet of life, only a fool like me would think that paying taxes is anything but state-imposed theft levied on the productive in order to buy the acquiescence of the parasitical. I know this to be true because National, ACT and certain elements in Labour tell me so, and who am I to argue with those who dominate our economic, political and social narrative?