Cash jobs = tax evasion

Inland Revenue are having another crack at discouraging cash jobs. Avoiding paying GST and income tax is blatant tax evasion, but there has been a general acceptance of it as fair game by many.

It’s not fair on businesses who do things by the book and can’t compete on price. And it’s not fair on those who ‘pay their fair share’.

One News has done a bit of investigating and reports Growing blackmarket in renovations sparks IRD crackdown on tradies doing cashies

A ONE News investigation has revealed a thriving blackmarket in the renovation trade, which is expanding in scale.

They haven’t revealed it, it is well known that it goes on, but they are helping highlight the problem.

We took one Auckland house badly in need of repair and we asked six tradesmen, chosen at random, to quote us for fitting a new bathroom and kitchen, re-painting and installing new carpet.

The work would be valued at between $10,000 and $20,000 depending on the scope of the work quoted by each tradesman.

Fifty per cent of tradesmen provided a cash price, without being asked – and their quotes ranged in value from $10,000 to $18,000.

Apart from cheating the system – and cheating those of us who pay all our income tax via PAYE and pay GST via our purchases – I think it’s very risky paying that amount of tax for that size of job. People who offer cash jobs are more likely to be shady and you are less likely to be protected if something goes wrong.

So who is breaking the law when a cash price is negotiated?

Andrew Stott from Inland Revenue says it’s “the tradesperson breaking the law – the tradesperson is responsible for paying taxes on their income,” while for the consumer “it’s not illegal to pay cash – it’s just silly”.

It’s more than silly. If you pay cash for goods or services knowing that tax evasion is likely then you are aiding and abetting it.

The Inland Revenue is today launching a crackdown on tradies doing cashies, their third campaign in Auckland and Christchurch.

Mr Stott’s advice to anyone doing work for cash and not paying tax is simple.

“Watch out. The holes you can hide this sort of money in are becoming smaller and smaller and we are constantly finding people.  A second piece of advice is just think about your part in New Zealand and your part in your industry, and play your part.”

If GST evasion was eliminated then for the same level of tax take the GST rate could be reduced.

From a few years ago: Cash jobs, crime drive black economy

Cash trade jobs, crimes, wages under the table and online trading are costing the Government more than $7 billion a year in lost tax.

That’s unpaid tax that us tax payers have to subsidise, about 10% of tax revenue.

How much do we pay? If we are on about an average income of $60,000:

taxpaid60000

You can check this for different incomes at My Tax Dollars.

That’s just income tax, add GST and it will be closer to $15,000 in tax per year for an average earner (that doesn’t get Working for Families accommodation subsidies).

Those who evade GST and income tax mean the average income earner pays perhaps 10% more than their fair share, or around $15,000 per year, or about $30 per week, because of dishonest people.

If tax evasion was reduced, and honest tax rates were reduced, there would be less need for WFF type subsidies.

Cash jobs = tax evasion

It costs a honest people a significant amount amount of money.

Media ignore Mallard tweet

On Wednesday during Question Time in Parliament Trevor Mallard sent a tweet that accused John Key of being involved in tax evasion.

This is a serious accusation by an MP who is deputy speaker and aspires to be Speaker should Labour get back into power (and their coalition partners agree).

Whale Oil posted on the tweet yesterday:

Disgusting defamatory smear on John Key via Twitter from Trevor Mallard

Yesterday at 2:34pm Trevor Mallard made a tweet that didn’t just accuse John Key of being associated with tax evasion, it actually stated he was involved.

I have a screenshot, but the tweet has since been deleted, and I’m not going to repeat what it said.

However a link purportedly showing the deleted text was posted in a comment showing that it had been public for about two hours.

Suffice to say it was highly defamatory and you would think that an Assistant Speaker of the House would know better than to use Twitter from inside the house to defame the Prime Minister.

But deleting the text doesn’t make the defamation any less.

It appears that the tweet said “John Key deep in tax evasion” – something that is widely implicated and stated around social media, without foundation.

It doesn’t take much to find examples, recently from The Standard in comments associated with Key’s deposit with company specialising in foreign trusts

Paul:

Crooked Key

AmaKiwi:

The world of Wall St. high finance is the world of tax evasion. I think Key is up to his eyeballs in trouble and fighting desperately to keep from drowning.

This sort of comment are common, but coming from an MP is another matter.

It is obviously an unacceptable tweet from an MP while in Parliament, and is not one that can be supported by any evidence that I’m aware of.

Slater is justified in calling it dirty politics, despite some irony in him complaining about others using smears in politics. Slater and Mallard have feuded for years.

David Farrar also posted on this at Kiwiblog – Mallard defames Key.

Mallard has since deleted the tweet, which basically said John Key is involved in tax evasion.

Now what makes this worse is Trevor Mallard is an Assistant Speaker of the House of Representatives. He is Labour’s nominee to be Speaker. His behaviour is incompatible with being an officer of the House. Smearing and defaming the Prime Minister on Twitter (and during question time) does not make people think you can preside fairly over the House.

Mallard needs to decide – does he want to be Assistant Speaker, or does he want to be Labour’s Attack Dog? You can’t be both.

As for Mallard’s smear. Well they’ve been trying the same line for almost ten years now and it hasn’t worked. You think they would come up with a new strategy, but it seems they can’t.

This week some of the media prominently launched into ‘news’ that promoted a ‘perception’ problem for John Key over trusts and lawyers even though there was nothing that pointed to any actual impropriety.

But they seem to have ignored the deputy speaker sending a smear tweet while Parliament was sitting.

Is this because Mallard is not taken seriously any more?

Or is it because stories promoted by Slater and Farrar via their blogs are now shunned by media after the Dirty Politics disclosures?

Or did it not fit with their anti-Key messages that have been prevalent this week?

Or a mixture of all of the above?

One thing is for sure – political news can be very selective, and topical targets can get hammered disproportionately while others get away with large dollops of dirt dishing.

Perhaps Mallard’s tweet will be dealt with appropriately through Parliament’s Privileges Committee.

The Greens promote themselves as having integrity and have long pushed for better behaviour in Parliament – should they rule out supporting Mallard as a candidate for Speaker should they get joint power with Labour?

Tax cheats and blog cheats

Anthony Robins makes some unsubstantiated claims in UK Labour to crack down on tax cheats.

Better late than never I guess – in the UK:

Labour pledges huge fines on tax avoiders to raise £7.5bn a year

Labour will declare an immediate, all-out war on tax avoidance and evasion if it wins the 7 May election, pushing emergency laws through parliament designed to raise more than £7.5bn a year.

That should put the cat among some comfortable establishment pigeons.

Here in NZ the Nats spend much more energy pursuing the much smaller problem of benefit fraud.

In support of that claim Robins links to a post of his own at The Standard in 2012 that quotes a study that claims Courts tougher on benefit fraud than tax dodging – study – that study is based on value of the estimated value of fraud, not the number of fraudulent cases.

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.
So is it a case of our courts demonising the poor?

“It highlights the prejudices we have against beneficiaries and that we’re judging them as different because of their work status,” says Sarah Thompson of Auckland Action Against Poverty.

Once discovered benefit fraud is usually much easier to charge for and convict on.

And no attempt is made to consider the chances of paying back fraudulently obtained money, nor is any analysis shown of other charges nor of prior convictions.

Back to yesterday’s post:

That’s consistent with their ideology and purpose, serving the rich at the expense of the poor.

That links to another post by Robins at The Standard, in 2013. It seems consistent with his ideology and purpose, to make ridiculous politically slanted assertions with no real evidence to back them up.

But Labour should follow the UK example and tackle the huge tax avoidance and evasion problem.

Tax avoidance isn’t illegal, but it is lumped in with evasion as if they were the same thing.

But the linked article on Stuff shows the National led Government (with Peter Dunne as Revenue Minister) have been addressing avoidance and have made improvements.

The article, which is also dated (2012) led with dramatics:

Inland Revenue has found only half of wealthy individuals worth more than $50 million each are paying the top personal tax rate, despite Government moves to combat tax avoidance.

There are about 250 New Zealanders with wealth in excess of $50m, deemed “high wealth individuals” by Inland Revenue.

New figures obtained under the Official Information Act show a sample by Inland Revenue of 184 of those individuals, taken between 2009 and 2011, found 49.5 per cent had declared they had earned $70,000 a year or more. The rest declared they earned less. Those who earn more than $70,000 are in the top tax bracket and pay 33 cents tax in the dollar.

But it then showed that compared to under the last Labour Government things have improved.

The figure has fallen slightly from the Inland Revenue’s previous sample, taken between 2001 and 2008, which found 50 per cent declared they earned enough to put them in the top tax bracket. The top tax bracket over that period kicked in at $60,000 and paid 39 cents tax in the dollar.

So has reducing the top tax rate to be closer to the company tax rate reduced how much income fiddling is done?

Concerns about the rich avoiding the top tax rate through income sheltering devices such as family trusts were raised in a 2010 report by the Tax Working Group.

Later that year, the Government took steps to reduce tax sheltering by reducing the top tax rate from 39 per cent to 33 per cent to align it with the tax rate for trusts.

The National took steps to address avoidance.

Council of Trade Unions economist Bill Rosenberg said tax avoidance was a worldwide issue which had led to the loss of more than $3.1 trillion in annual tax revenue.

“If governments internationally, including New Zealand, could do more to track down dodged taxes we might not be facing the degree of financial austerity and government cuts that we are seeing around the world.”

That addresses one of the main problems dealing with tax avoidance – it’s an international problem and very difficult for one small country to do much about it without substantial international co-operation.

Successive governments (including the current National led government and the previous Labour led government) talk about tightening up on tax avoidance and take measures to try and address it.

They also talk about clamping down on tax evasion, and try to take measures to deal with it. And in opposition overstate the lack of action in dealing with it.

And bloggers talk bull, even the more moderate ones like Robins.

He implies that suddenly the UK Labour Party has decided to do something about tax cheating as if it had been ignored in the past.

And he suggests that National have been more lax on tax cheating than Labour Governments. But he makes a very poor and obviously partisan case.

Going by the history of posts that Robins has shown he has an interest in tax evasion and cheating, but he is doing some fact evasion and political cheating.

And if you read the Guardian article on tax cheat election promises in the UK you will see it’s full of bull.

The manifesto will seek to bolster Labour’s damaged economic credibility by focusing heavily on a strategy to “protect the nation’s finances” and will aim to highlight its message that working people should not have to pay more to compensate for tax abuses by the rich.

Labour sources… described the target as ambitious but achievable.

Is achievable believable?

Conservative Treasury minister David Gauke said: “We have taken action as part of our balanced plan to reduce the deficit – clawing back £7bn per year in lost revenue by forcing the wealthy to pay stamp duty on property, making sure bankers pay higher tax rates than their cleaners and ensuring big global companies pay their fair share of tax. And we will go further and claw back another £5bn in the next parliament.”

The Conservatives have already done something about ensuring the rich pay more tax? That doesn’t exactly support the Robins Tory rort message.

Cheating on tax, cheating on taxpayers

The ODT reports on tax cheats:

$80m tax evaded, IRD says

Tax-dodging New Zealanders cheated the country out of at least $80 million tax on undeclared income last year.

The Inland Revenue Department has revealed it received about 177 tip-offs a week from disgruntled Kiwis about earnings being concealed.

Of the cases the IRD has been told about, the difference between what tax was reported and what the IRD calculated should have been paid reached $82.6 million in the year to June 30.

A lot of evaded tax is never recovered as often tax is evaded by people who have no money to pay it.

IRD’s group tax counsel, Graham Tubb:

“Persons in the community who are choosing not to pay their tax deliberately are creating a degree of burden on the rest of the taxpayers. There’s no question about that.

“What we don’t know is how many people aren’t paying their fair share and how much that is.”

Those who cheat on tax are cheating the rest of us, including those of us who pay our fair share of tax.

The cases covered a range of people, including trades people doing cash-in-hand jobs and people with funds overseas not declaring their bank deposit income.

The department had received 4608 tip-offs from the public over alleged tax evasion to June 30.

And that shows that some people are prepared to report the cheats.

Revenue Minister Peter Dunne said the 2012 Budget allocated the IRD an extra $78.4 million for the next four years to deal with the hidden economy, debt collection and unfiled returns.

And IRD is doing what it can to identify tax cheats and recover tax that has been evaded.