Tuesday, August 13, 2013

Unsurprising II

Last year we learned that the courts were three times as likely to jail people for welfare fraud than tax fraud, despite the average offending being only a third the size. But that's not the only difference. It turns out that the government views the two types of debt differently as well:

Associate Professor Marriot’s latest research found that taxpayers can apply for financial relief from the IRD, but this is not an option for welfare debtors. In the most recent period (1 July 2011 to 30 June 2012) IRD wrote off nearly 50 percent of interest and penalties applied to overdue tax, amounting to $374 million. Furthermore, IRD wrote off $435 million in core debt (11.6 percent of collectable debt) while MSD wrote off just $8.7 million in core debt (2.1 percent of collectable debt).

Associate Professor Marriott says that in the 2011/12 period, the average value of outstanding tax debt was $14,479 per taxpayer in debt, while the average value of outstanding welfare debt was $2,523 per beneficiary in debt.


“There appears to be no basis for treating debtors to the two government agencies differently. However, these findings indicate that tax debtors get off more lightly,” says Associate Professor Marriott.

Marriott highlights the difference in official attitude towards the two types of debtors, which sees welfare debtors as less deserving. But when you think about it, this is the opposite of the truth. Tax debtors are cheats who have failed to pay what they owe. Most welfare debt OTOH is the result of administrative error by WINZ, not of any action by the debtor (the rest is largely loans and advances to which people are statutorily entitled - which again is a long way from the deliberate malfeasance of the tax debtor). And yet we spend far more money trying to collect the latter, and pursue the victims of such errors to the grave, while letting actual tax cheats off lightly.

This has to change. The differential treatment of tax and welfare debtors undermines confidence in the fairness and impartiality of our government services. And if IRD went to even half the effort to chase down debtors as WINZ, the government's budget, and our schools, hospitals, and public transport systems, would be much better off.