Dealing with Tax Evaders

Press, Volume XCII, Issue 27705, 8 July 1955, Page 10

Dealing with Tax Evaders

Magistrates on occasion have emphasised the difficulty of determining an appropriate penalty for the tax evader withopt knowing what penalty will be imposed by the

Commissioner of Inland Revenue for the same offence. The list of tax evaders, with the amount of tax evaded and penal tax imposed, published in the latest Gazette, illustrates clearly how difficult it is for the Courts to administer justice while the Commissioner exercises

these penal powers. The Gazette names 224 persons and companies who evaded tax amounting to £290,000, on which penal tax of £145,000 was levied by the Department of Inland Revenue. From these figures it is clear that thej deterrent effect of the penal tax is much less than the public has been led to suppose—and as Magistrates have sometimes been asked to believe. Last week the Minister of Finance drew attention to the ■Commissioner’s power to levy a! ! penal tax up three times the amount of the deficiency. It is right that the Commissioner should : exercise his punitive powers temperately; for he is both prosecutor and judge. But the list shows such wide 0 variations in the proportion of penal tax levied that it is clearly impossible for a Court, when fixing’ a : penalty, to relate it to the penalty (that will subsequently be imposed by the Commissioner. In most ‘cases in the list the penal tax is ; less than the amount evaded, i though in some cases it is significantly greater. These differences I presumably express the Commissioner’s opinion about the degree of the offences; they are decisions arrived at by the department according to rules of its own. The department does not prosecute in every case of evasion. One schedule in the Gazette (of 51 persons and [two companies) is of persons convicted; a second schedule (of 139 .persons) is of evaders who have i been charged penal tax but who • have not been prosecuted. No doubt. | extenuating circumstances account 'for the distinction. The point is •that in some cases the department dispenses with the Courts and levies I its own penalties. The department also dispenses with the Courts in cases where evaders take advantage of the department’s “ undertaking ” that where evasion is voluntarily disclosed the taxpayer may avoid prosecution and have his penal tax limited to interest on the amount of tax underpaid. Administrative justice and divided justice are equally objectionable in principle; and here they are poorly justified in practice. The present methods of dealing with tax defaulters are a

reproach to our judicial system; and it will be removed only when the power to punish offenders is placed where it belongs—in the hands of the Courts.