Unfortunately, the systematic use of tax avoidance strategies – by corporates and by wealthy individuals – is not occurring in a vacuum. At an accelerating rate, new technology is wiping out the sort of jobs in the retail sector, white collar professions and transport industry that up until now, have sustained the middle class. The winners circle is shrinking. At the same time, populations are ageing and healthcare needs are expanding in every developed country on the globe. Meaning: more and more of the care of the aging boomer generation will fall onto families who are currently losing their stable incomes and who are becoming reliant (at best) on short term insecure contracts, and on multiple low paying jobs. Simultaneously, governments are watching the tax revenues that might enable them to respond to social need – assuming they felt inclined to do so – vanish into offshore tax havens, and via a range of ‘grey area’ tax dodges.
Elsewhere, governments in North America and Europe seem aware of these converging forces. At least a debate is occurring in the U.K about whether governments are gearing up to eliminate the channels for tax avoidance with quite the same righteous zeal they’ve shown in recent years about cracking down on benefit fraud. Here though, not so much. The Key government continues to live in denial about the ease of avoiding tax here, at least for those who have the means to afford the necessary tools. At the same time, much of its efforts continue to be directed into areas that are more politically convenient, such as pursuing the trickle of money lost annually in benefit fraud. So far, we certainly haven’t heard government direct the same scorn and scapegoating language (used on beneficiaries) at the rich who consciously push the legal boundaries on tax avoidance. Spongers on expense accounts tend to be treated with more respect.
So it goes. For years, the incidence of benefit fraud has never matched the political rhetoric. A special fraud intelligence unit was set up in 2007 within the Social Welfare department to detect benefit fraud. Here’s how I reported on its track record back in 2011:
Last year  the department checked 29 million records, and found the benefit fraud rate (as a proportion of the total benefits paid) was a miniscule 0.10 per cent. A declining number of prosecutions – from 937 in 2009 to 789 last year – resulted. Of the $16 million in benefit fraud detected [in 2010] a proportion was carried out by social welfare staff – ten of whom were sacked last year for ripping off the system – and not by beneficiaries themselves. While any level of benefit fraud is unacceptable, the $16 million a year currently being incurred is hardly an intolerable burden. Last year, New Zealanders spend $16,1 million a day on impulse purchases.
Even five years ago, it was already clear that tax dodging by corporates was a far, far bigger problem than benefit fraud:
Moreover, other forms of unacceptable behaviour leave benefit fraud far behind in the dust without attracting the same negative stereotypes. The major foreign owned banks for instance finally agreed in late 2009 – and only after being pursued at great expense through the courts by the IRD – to cough up $2.2 billion of what they owed in unpaid taxes. Meaning : the settlement figure for this case alone was about 140 times greater than the total amount lost in benefit fraud last year..
In large part, what sustains the political rhetoric on benefit fraud is the hostility that exists between the working poor and those on benefits. Governments have done their best to stoke this resentment. They can earn votes and build their political careers from doing so, in the name of ‘welfare reform.’ When a previous National government mounted a major attack on beneficiaries – ie, the “Welfare Time Bomb” exercise of 1997 – the programme included dob-in-your-neighbour proposals and anti-welfare pledges that were posted to every single household in New Zealand.
Nothing much has changed. Earlier this month, the No Right Turn site followed up on UK evidence that 85% of these tip offs proved to be false allegations, and sought figures on the corresponding situation in New Zealand. The inquiry elicited this fascinating official document. It contains this breakdown:
In the 2014/15 financial year, the Ministry received 12,530 fraud allegations from the public, staff and other agencies. Of those, 11,592 allegations were received from the public….[T]he Fraud Investigation Unit completed a total of 5,342 fraud investigations and 927 successful fraud prosecutions in the 2014/15 financial year. There were also 1,619 overpayments worth over $51.7 million established during the 2014/15 financial year.
As NRT commented:
Overpayments aren’t fraud, and most aren’t detected as the result of public allegations (most are WINZ fucking up, which means someone getting a different sum from that which they are entitled to). There’s also caveats around investigations and prosecutions not necessarily occurring in the same financial year as allegations. Still, the 2014/15 figures aren’t out of line with their publicly released figures for past years, so we can get a ballpark solution. MSD seems to have taken “successful prosecution” as a proxy for “substantiated”, so if we take them at their word, it suggests that 92.6% of all allegations of benefit fraud are false. And even if you buy into their “overpayments are fraud” line, then that means that 87% are false. Looking at investigations, over 80% of them don’t result in successful prosecution. Which really makes you wonder if we’re getting value-for-money from the Fraud Investigation Unit. Because on these statistics, it looks like they’re mostly just spinning their wheels on pointless and intrusive snooping into innocent people.
Right. This willingness of officials and politicians to repeatedly take “overpayment” (ie the department screwing up) and attribute it to the people on the receiving end ( “benefit fraud”) is not limited to New Zealand. Here’s an example of a US politician being caught out doing exactly the same thing.
What’s the point I’m making here? Mainly to underline just how very different the tone of the official response to the Panama Papers has been, compared to what we normally hear from our leaders about benefit fraud. Apologists point out that tax avoidance is legal, and that many foreign trusts provide means for ordinary folk to protect their savings and investments. Well, cry me a river. By contrast, the fact that benefit entitlements are legal and that 99% of New Zealanders will be beneficiaries at some point in their lives, hasn’t saved the mere receipt of a benefit from being widely stigmatized, for political gain. The day that we hear politicians lamenting the extent of inter-generational dependency on foreign trusts by the wealthy, will be the day when we know we’ve got somewhere.
Be Careful Out There
Automatically, the phrase “Dark Triad Personality Constellation” could make you think of John Key, Bill English and Steven Joyce. Not so. In academic circles it signifies the convergence of Narcissism, Sociopathology and Machiavellianism. (Again : Key, English, Joyce? But no.) The Dark Triad turns out to be an element in an influential British academic study that has sought to answer empirically the same question that used to bedevil Mel Gibson: namely, what do women want? Allegedly, the majority of women are attracted to high Dark Triad personalities, and this supposedly could be a determining factor in what the academics call ‘mating strategies’ and the ‘evolutionary arms race.’ Hmmm. Many women seem attracted to the bad boys. Who knew – I mean, apart from the Shangri-Las? Here’s the academic paper that seeks to prove it.
Fun With Parquet Courts
For the past few years, the NYC band Parquet Courts have been a reliably unpredictable presence – they’re got the kind of off-kilter smarts that a previous generation used to attribute to Steely Dan, assuming that Steely Dan had come from a hardcore, DIY background. There’s a laconic, wilful Pere Ubu element in there, too, and – most obviously – entire burning chunks of classic Velvet Underground. Traditions exist to be ransacked.
Here are a couple of tracks from this month’s new Parquet Courts album, Human Performance. “Berlin Got Blurry” is a pretty amusing concept, even more so given that the arrangement features a Western-movie guitar riff, and hokey organ…This is not what your album covers usually tell you about Berlin.
And they double down on the smartass verge-of-irritation factor on the album opening track “Dust”.