Pity The Poor Income- Tax Dodger!

NZ Truth, Issue 985, 11 October 1924, Page 5

Pity The Poor Income- Tax Dodger!

Lawyer's ,F { utile Plea

Publicity Pillories Guilty, Encourages Virtue In Others

Monetary Penalties Not In Themselves Sufficient To . Punish Prof itable Evasion

Although the.ifine that aS^Court imposes on an evade/ of income tax may be only a fraction of his reparation, the monetary penalties would not be sufficient to check evasion if the offender were protected from publicity. Publicity is not only part of the punishtnent of the' individual, but is also the principal deterrent of other taxpayers subject to similar temptations.

Very pouching is a lawyei-'s recent ] plea, ,to a Magistrate to protect a poor evader of income tax from the fierce light of publicity. The evader of income tax is v a man who plays for high stakes. On the other side of the scales, what are the risks he runs of / punishment? 'And should his lot be lightened of that part of his punishment represented by publicity? • " ■ ■ * An Offender's Liabilities. Suppose that a man receives an income that' should carry a tax of £50 a yjpar. Suppose that, through either negligence .or wilfulness, he so disguises his income that he is called on to pay only P. 25 a year. After three years he is detected, and the Commissioner of Taxes knows that the evading taxpayer ha.s deprived the. Government of £25 a year for three years, or £75 m all. In that case, the taxpayer has become liable for (a) additional tax; (b) deficiency tax; (c) penal tax, which can run as high as treble his deficiency tax; and (d) prosecution m Court, with resultant fines, costs and expenses. Additional tax (a) consists of the late-payment additional charge on the unpaid tax-money, m each of the three, years. Assuming this late-payment charge to be 10 per cent., the money due by th taxpayer under this h&id is 10 per cent, on £25 (£2 10s) for each of three years, or £7 10s m all. The deficiency (b) is, as shown above, £75 for the three years; and the penal tax (c), if levied at the maximum, is three timej the deficiency, or £225. So, under these three heads the taxpayer \is liable to be called on to pay £307 10s, before ever entering the Magistrate's Court. ■ But m .levying the penal tax (c), the Commi .sioner of Taxes is allowed a discretion. • In some cases- the trebling of the deficiency (which may run into thousands) would put the taxpayer into the Bankruptcy Court. So the Commissioner of- Taxes, m demanding penal tax, may make a, less demand tha •: the statutory maximum, three times the deficiency.- Also, his assessment of penal tax is subject to the taxpayer's right of appeal to a Magistrate. „ If, m the supposititious case under review, 'the full penal demand is made, then the taxpayer goes into Court with a £307 10s liability; and if he is convicted on three charges, one for each year, and is fined £10 oil each, his liability' is lifted to £337 10s, not counting costs and expenses. Publish him?— Certainly! And now, on top' of all, comes the publicity of the Court proceedings. And at the same times" comes the plea that because of the additional tax, and the deficiency tax, and the penal tax, plus the fines and costs- — because of all these the poor fellow shall not get info print. The plea is rubbish. All those money penalties put together ".on't make taxevasion a, hopelessly unprofitable game. Far from it. The fraud that is intentional, "and the fraud, that poses as (and on rare occasions is)

negligence, would alike disappear if the game were altogether unprofitable^ But they don't disappear. At the best they are kept m check. From the standpoint of punishing the individual taxpayer — he who might have rolled m thousands if ,he had "got away with it" — the monetary punishment, plus the publicity, • is not excessive. ' ' .- And from the standpoint of deterring other taxpayers who are inclined -to dishonesty or negligence, publicity is m the highest degree essential. The publication of the way, of the transgressor keeps others honest, -and brings some of the dishonest to the penitent form. For it is a fact that some undetected evaders are moved to confession, and are then dealt with by the Commissioner of Taxes with such mitigation of punishment as their admissions may be. deemed to merit. There is, of course, no parallel between publicity m the case of a proved evader, and publicity m the case o£ one who merely objects to assessment. The former is a law-breaker; the latter is exercising a lawful right, and his case is heard m a closed Court. The law sees no more ground for publicity m the latter case than for protection from publicity m the former case., ■ • The Fifty-Fifty "Specialist." , In the Australian States there are two Governments (Federal and State) and two income taxes. Under this, complicated system has grown up, m New South Wales and Victoria, a class of "income tax specialist," who is m some cases a "tax-evasion specialist." Ex-employees of the Government taxing departments are sometimes found m the "taxation-spechtlistV business, claiming special knowledge m that they know the departmental systems, and know how to build up a technical case for reductions and refunds. The existence of a corps "of "taxation-special-ists," offering their services to taxpayers for .fee, is a not very satisfactory state of affairs even when they stick to fees (as a lawyer does) ; but, .worse still, it is known that where a taxpayer has been served with a provisional assessment by one of the taxing departments, and is hopeful of a refund, but does not know, how to secure it, "taxation-speqialists" sometimes take up the case on a shades basis/as 50-50. A "taxation-special-ist" is tempted to go a long way to get the better of the department, when his reward is half, the refunds. * It is fair to add that some 1 of the Australian "taxation-specialists" are men pf undoubted ability, who can put a case for the -taxpayer- and win %him his just deserts, and whose fees are only a fair charge for their services. Still the system.' is obviously open to abuse. It does not appear 'to exist m New Zealand, at any rate not m its worst phases. A .country with only one taxing authority and only one income tax, offers less foothold. Even- as things , are, there is quite enough dishonest beating of ,-the taxgatherer m New Zealand^ - s Arid the evil would intensify if the searchlight of ceased .to play •on the offenders. ' . \