Friday, April 12, 2013

Against the tax-cheats

Two pieces in the media today highlighting tax-cheating in New Zealand. In the first, Deborah Russell highlights cheating by wealthy individual taxpayers:

[W]e hear very little about another set of people who rort the system. These are the people who manipulate their earnings, and use elaborate financial structures to ensure that they don't have to pay as much tax as they ought to.

We have clear evidence that many taxpayers engage in this type of rort. The evidence comes from the numbers of taxpayers at different income levels... What this shows is that some high- income earners are not prepared to pay tax. They look for any means whatsoever to reduce their income tax, despite generous changes in their favour.

In the second, Labour's David Cunliffe highlights cheating by multinational corporations:
The Herald asked this writer if it seemed fair that in New Zealand Apple paid only $2.5 million in tax on $571 million in turnover. Of course tax is paid on profit, not revenue - and Apple NZ apparently made only $5.5 million in profit and paid 31 per cent tax on that. Fair enough?

Oddly, Apple shares have climbed 73 per cent from US$404.30 to $700.09 ($471,00 to 815.85) over the tax year to September 2012. Its global profits climbed from US$25.922 billion to $41.733 billion, or from 23.94 per cent to 26.66 per cent of sales revenue during that time. So why was its New Zealand arm so apparently unprofitable at less than 1 per cent of sales revenue, relative to Apple's global operations?

In both cases, this cheating deprives the government of revenue, and therefore New Zealanders of the social services we expect. It also shifts the burden further onto those who do pay, punishing good citizens for the profit of the bad ones. And its simply not acceptable. Our government should be doing everything in its power to crack down on these tax-cheats, auditing those whose incomes hover suspiciously around band-changes, and using a generalised anti-avoidance principle against multinationals playing corporate shell-games to hide their true profits. But National won't. As Cunliffe points out, it won't even require large multinationals to publish their revenue, profit and the amount of tax they pay in order to shame them into being better citizens. National is firmly on the side of the tax-cheats - not of ordinary New Zealanders.