Wednesday, June 22, 2016

Welfare fraud versus tax evasion

Various coverage occurred yesterday about Victoria University research into the lack of even-handedness in dealing with welfare fraudsters versus tax evaders. There is even a very large billboard mounted just to the left of the motorway heading into Wellington highlighting the issue (thank you taxpayers.)

The following is, I believe a misunderstanding on the part of the lead researcher:

Ms Marriott said despite the higher cost of tax evasion, people who committed welfare fraud were judged more harshly because society had little sympathy for people on welfare.

People have plenty of sympathy for those on welfare; for those who have suffered a redundancy, the loss of a spouse, an accident, a disability, care for disabled children etc. But fraud is an abuse of their sympathy and causes anger.

More importantly, what people have little sympathy for is the idea that the state controls all the money and it decides how much of it you can keep. Whether you personally helped create the money is immaterial.

So when an individual attempts to keep more of what he has created there is less anger than when someone tries to take what he hasn't. That is why society has greater tolerance (and exhibits it through the courts) for tax evasion than welfare fraud.


The Veteran said...

Sage comment Lindsay. Not covered off in the research is that the penalties for tax evasion are substantially higher than those for benefit fraud. There are myriad of cases of benefit fraud where the penalty imposed is akin to a slap on the face with a wet bus ticket ... pay back at $10/week or not at all. Tax evasion attracts compounding penalty interest on the debt while assets can be seized to help pay for it. Once the IRD has you in their sights you can expect sustained monitoring of any and all business activity.

Anonymous said...

I suspect that evaders generally still pay plenty but just less than those who know best would like.


JC said...

The article is in the same class as Barrack Obama's defence of Islamic terrorists because Christians went on Crusades 1000 years ago and without acknowledging Muslims were the original aggressors and took Christian territories by force.. or the occasional atheist who justifies his anti religious rant on the Spanish Inquisition of hundreds of years ago.

In both above cases and the tax thing the proponents are making comparisons of essentially unrelated, irrelevant and/or redundant items.

Benefit fraud strikes at the heart of one of the main justifications for tax.. if you allow it or don't prosecute it you can't justify collecting the tax to pay for benefits. Whilst greed may be the dominant feature of tax evasion it is also a disagreement on the fairness of all or some aspects of tax.. particularly if the evader can point to widespread benefit fraud.

Tax evasion is wrong, but if enough voting tax payers believe their enforced charity is unjustified then eventually the tax take will be reduced and beneficiaries will suffer. Put another way beneficiaries themselves have a direct interest in ensuring that benefit fraud is punished and the spurious arguments from the U of Vic are incendiary to most tax payers and counter productive.


Anonymous said...

"tax evasion" is keeping your own money.

"welfare fraud" is stealing other people's money. Actually, "welfare" is stealing other people's money.

"People have plenty of sympathy for those on welfare" - some do. Some don't. The question is never about sympathy: it is about whether such people get to take other people's money, plain and simple.

Jim Rose said...

what an excellent argument.

AnotherFan said...

A tax fraud apologist. What a surprise. NOT