Tax evasion a booming business — M.P.

Press, 26 February 1981, Page 8

Tax evasion a booming business — M.P.

PA Auckland Tax evasion was a booming business,, the- National member of. Parliament for Manar watu, Mr M. E. C/Cox.'has said at a seminar in Auckland.

“Every man and his dog. is now spending a considerable proportion of his working hours devising ways to minimise his tax bill,” he said, “I believe tax avoidance and evasion is costing the Government a small fortune in lost revenue and have recently had figures of 7 per cent of gross domestic product, $1452 million, quoted as the cost.” The general manager of the Broadbank Corporation, Dr D. T. Brash, said that the drive to find ways of avoiding tax had reached epidemic proportions. Staff of widely varying levels of skill and responsibility sought part of their remuneration in the form of a company motor - vehicle, parking facilities for a private motor-vehicle, subsidised accommodation, below-mar-ket mortgage loans, and other benefits. "In one company I knew

of, almost 40 per cent of the total staff enjoy the use of company motor-vehicles, and with the pre-tax cost of running such vehicles at $6OOO to $BOOO annually, is it any wonder?” said Dr Brash. The present tax system was not. particularly equitable. Wage and salary eameis earning $15,000 a year tyP l " cally paid more tax than 'those earning $5OOO but selfgmploved people earning $40,000 a year might well pay less than either group through the use of legal methods of tax avoidance or illegal methods of tax evasion. "I was told recently by the managing director of one of New Zealand’s largest companies, a man who is almost certainly earning $50,000, a vear anil who is undoubtedly paying a very substantia! amount of income tax on it, that one of his relations, who owns a farm worth in excess of $1 million, has not paid income tax for more than 20 years.” . Dr Brash’s solution to this “unhappy situation” was a proportional income tax on virtually all forms of personal

income at a rate of 20 per cent to 24 per cent. Such a svstem would eliminate the- inflationary bias through -wage and salary demands in the present system of steeply rising marginal tax rates.

An Auckland tax expert and company director. Mr L. N. Ross, said that under present conditions he doubted whether the consumers price index was a suitable measuring rod for wage negotiations.

“If indirect taxes are to continue to enter the index and its composition is to remain unchanged, I suggest there is a case for a specially compiled, carefully weighted index to be used for award and .wage-arbitration purposes,” he said. “Certainly there is a strong case for ail taxation not just indirect tax, being brought into consideration.”

Mr Ross said that the consumers’ price index excluded direct taxation but it was an incontrovertible fact that direct taxation did enter into the price structure.