Friday, March 15, 2013

The cost of tax evasion

How much does tax evasion cost us? Sure, IRD estimates that its between $1 and $6 billion a year, but what does that mean in policy terms? Writing in the Herald, Catriona MacLennan puts it in context: if the rich stopped cheating, we could eliminate child poverty:

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.

National is happy to tolerate tax evasion, and they're happy to tolerate child poverty. But if you polled ordinary kiwis, you'd find them much less sanguine about the issue. Both are social evils. Tax cheating robs government of revenue it needs to help us build a better society, while boosting inequality and reducing social solidarity. Child poverty robs children of their future, and imposes long-term costs on the rest of us. Both need to be eliminated. And we need and deserve a government which will commit to that.