Gordon Campbell on being humane about welfare, child support and tax

It made for an unusual Venn diagram, but Greens co-leader Metiria Turei and Finance Minister Steven Joyce were briefly sharing some common elements this week in the set that says – hey, don’t use the powers of the state in ways guaranteed to make the system you’re trying to defend worse, not better.

Turei has been criticizing the self-defeating practice of imposing financial penalties on poor people, for their failure to comply with the welfare system’s work requirements. Her point: being punitive to people already on the breadline is likely to breed deceit, not compliance. Mercy, not justice, is often the better response. This doesn’t mean letting people off scot free. It means treating them as human beings, not as cost sinks.

Meanwhile, for his part… Joyce was acknowledging that if child support payments are ever to get out of the red zone, the penalty element in the money owed may well need to be waived – given that many of those behind in child support are actually fleeing from the snowballing penalties for missed payments, as much as they are from their original obligations. Therefore, the focus should be on the original amount owed, not the theoretical amount owed if all the penalties are still actively pursued. For the record, the total debt owed by the 122,816 people behind on their child support is $2.81 billion – but a whopping $2.2 billion of that amount is comprised of the state’s imposition of penalty payments. The core amount owed is $616.7 million.

What Joyce and Revenue Minister Judith Collins are proposing is that the bigger, discretionary part of the equation – the state’s penalties – should be waived, in order to try and recoup those core amounts owed. Unfortunately – and this is where the similarity to Turei ends – the government is proposing to give itself the powers to deduct the amounts directly from the wages of the people concerned, and deal with the consequences later.

Supposedly, this wage deduction aspect will form part of a wider IRD scheme that will assess a range of income sources currently being estimated on an annualised basis, which is less-than-reliable. In particular, IRD aims to re-adjust Working For Families payments – 40 % of which are currently being underpaid, while a further 25 % are overpaid. This situation reflects how people in irregular employment experience fluctuations in their income over the course of a tax year, and it has often been redressed in the past by simply writing off the over-payments – but the new, more flexible IRD system will make that outcome less common. As the Child Poverty Action Group has pointed out, many poor families have hitherto been able to augment their meagre income via these waived accidental overpayments – and WFF payments that will ebb and flow in future in line with variable wage income could well have the unintended consequence of making budgeting tasks all that much harder.

Turei did more than offer a belated confession to having ripped off the system, long ago. Clearly, she was hoping to kickstart a debate on the selective morality of our welfare system and the incentives it offers – which tend to be comprised of big sticks for those on welfare, and a far more sympathetic hearing for corporate tax cheats. On several occasions, Lisa Marriott of Victoria University has criticised our relatively sympathetic approach to tax fraud, as opposed to the harsh treatment meted out for welfare fraud. Her evidence is cited here and here as well.

That systemic unfairness is further exemplified by the child support system. In the event of family breakdowns, the affluent can readily re-jig their finances in ways that minimise their child support obligations. By contrast, the weekly pay packets of the liable working poor will make them sitting ducks for the salary deductions that Collins has in mind.

To be clear: no one should evade their responsibility to the children they’ve brought into the world. My point is that the enforcement system enables some to dodge the consequences legally and in plain sight, even while it punitively goes after those who cut and run. Until the state gets serious about the methods of hiding wealth and income for child support purposes, the weight of enforcement in the child support regime will continue to come down hardest on those with the least disposable income to offer.

Which brings us back to the issue that Turei was raising. In her view, the welfare enforcement system tends to target those least able to cope with the impact of the state’s attention. As Turei says, we need a more responsive system of welfare assistance that proceeds on the assumption that the bulk of people receiving state assistance actively desire to change their lot – and thus they will co-operate with a hand-up if a genuine alternative is being offered to them. At present, and despite all the jargon about beneficiaries being ‘clients’ and ‘customers,’ WINZ operates as one of those businesses where the customer is always wrong.

International Tax Obligations

Currently, Treasury estimates that multinationals are dodging $300 million of tax in New Zealand, and believes it may be able to recover a third of that figure, given the resources to do so. Since we’re talking of $100 million being split between Apple, Facebook, Google etc it looks as though Treasury is bravely going for the annual spend these multinationals have on takeaway coffee.

In brave little battler mode, Labour leader Andrew Little has reportedly written to Apple, Facebook, Google etc asking them to pay up their fair share of tax. Good luck with that. As I’ve intimated, the money involved is miniscule by their standards. A fortnight ago, the Times of India described the $US110 million fine imposed on Facebook by the EU (solely for Facebook’s behaviour during its $19 billion acquisition of Whatsapp in 2014) as a “slap on the wrist.”

Yet that’s more than Treasury is realistically expecting to recoup from all the MNCs combined.

In other words this David v Goliath pageant is being played out here almost entirely for domestic political reasons. The MNCs concerned could flick their NZ operations and not notice the difference; and that’s something they’d probably rather do than create a compliance precedent useable against them elsewhere, in more lucrative markets. By all means, let Treasury do its best, but the real battle on compliance is occurring elsewhere, within the likes of the European Union. Multilateralism may have its problems, but the regulatory frameworks of the EU are just about all we have as a line of defence, against the global operations of predatory capital. No wonder oligarchs like Trump and Putin are doing their best to undermine it.

Into the Quietness

A few soothing tracks this morning… Buddy Ross’ quietly insistent ‘Runnin Around’ was sampled on the recent Frank Ocean cut “Be Yourself” but here’s the original, which flows as inexorably as water…

And then there’s John Ross, better known for his role in the power pop band Wild Pink. But he also records an emo form of ambient music, under the name Eerie Gaits. This for instance, is a really lovely pastoral meditation called ‘Eau Gallie’…

And for something more elegant and less reflective, this is FKJ – an acronym for French Kiwi Juice – and a happily swinging, jazz and house inflected track called “Joy”…