Why the taxman needs even more draconian powers than the police

clearly you can have too much of a good thing

HIDESIGHT

Oliver Wendell Holmes supposedly said, “Taxes are the price we pay for a civilised society.”  

But clearly you can have too much of a good thing.  Even life-saving medicine kills at high dose.

And so too will tax.

Back in Mr Holmes’ day the tax take was 4% of everything Americans produced. The republic had no income tax.

Our constitutional monarchy now thumps us for 26% of all that we produce.

That’s the price we pay – not for civilised society – but for the policy promises political leaders must make to be voted prime minister.

Our Parliament has worked assiduously to make that tax take politically palatable; first, by making it invisible through PAYE and GST and, second, by placing the job of tax collection on the few, not the many.  

It’s businesses that must collect tax, all at their own expense. Shoppers and employees are blissfully unaware of the tax they must pay and the hassle and cost the collection entails.

IRD hunts the law-abiding
Of course, businesses on our behalf don’t give up over a billion dollars a week lightly. Tax has to be thumped out of them. And thumped hard.

The government’s appetite is now so huge that the thumping requires police state powers. It’s not possible to collect the tax our politics needs consistent with the rights of free citizens and the principles of a just society.

The law must of necessity be upended and thrown against the poor taxpayer.

There would rightly be a huge hue and cry if Parliament granted the powers of Inland Revenue to the police. But astonishingly, Parliament granted these powers to the IRD without a whimper.  

The IRD isn’t hunting murderers and rapists. It’s hunting law-abiding citizens going about their private business.

The difference is that murderers and rapists don’t bother Parliament. Tax does. Tax is the oxygen that enables our government to breathe and to grow. Politicians will pass whatever law it takes to get the cash they need to fund their election-day promises.

To gather in more than a billion dollars a week, Parliament has had to reverse the burden of proof. The IRD simply must assert a tax liability.  

Taxpayers no right to silence
It’s up to taxpayers to prove that the IRD’s assessment is wrong. Indeed, they must not only prove the IRD’s assessment wrong but by how much.

There’s no innocent until proven guilty in tax collection. Parliament has made sure of that.

Taxpayers also don’t enjoy the right to silence. Murderers and rapists do.

The IRD can compel (with criminal penalties for refusing) taxpayers to give over all documents that the IRD considers necessary; and compel taxpayers to attend interviews and be cross-examined (again with criminal penalties for refusing).

The police hunting the worst murderers can’t do that.

But get this: the poor taxpayer must get a court order requiring information from the IRD if the IRD refuses to release it. That involves lengthy and expensive proceedings.

Oh, and by and large, the IRD’s actions leading up to and making an assessment can’t be judicially reviewed.

Parliament has granted the IRD extraordinary powers – powers that don’t exist outside of totalitarian states – and also made it next to impossible for citizens to question the IRD. Under these rules the police would have most of us in jail.

The IRD can’t collect the tax our democracy demands under the usual rules. It requires fascist powers to collect.  

Tax no longer provides for basic law and order and civilised living. It’s grown into a monster and the very antithesis of civilised society.  

A little tax might be a good thing. But the present dose is toxic.

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40 Comments & Questions

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And people wonder why those of us who actually work for a living HATE paying for useless people to breed!

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Yes and they have slogans like "We're Here to Help" and "It's our job to be fair" and so on.

All you can hope for really is to just stay out of their sights i.e. pay all your tax bills on time and in full and hope they never just randomly decide to come after you.

Imagine not having income tax! Most people don't know it's only been around for a bit over a hundred years...

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I read some years ago the NZparliamentary debates on the introduction of income tax. It was a trivial amount for just a few high income earners. MPs warned it could easily get out-of-hand and affect everyone. They were pooh-poohed.

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If large corporates werent allow to use high end tax loop holes then the little guys wouldnt have to be farmed so much by massive tax increases that we have suffered. Top Tax rate may have fallen but with GST rates etc etc all rising the net result is more taxes for people less for companies.... backwards if you ask me

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Not true. There aren't high end tax loop holes. There is evasion but it's all at the low end -- cash jobs and the like.

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So wine box style practises dont occur? I bet if you investigated international corperates you would find "tax effecient" mechanisms designed to take money out of the country without paying anywhere near the rate that joe public pays, this may be "legal" but only because those with the gold make the rules, that is the true golden rule in todays world

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An excellent article Mr Hide. The rights of the individual seem to be eroding against the powers of the state. When will the questioning of a departments powers (such as in your article above) also be deemed as deconstructive; and legislated against? Perhaps thats just paranoia... then again is this already happening in countries like china? censorship of free thought... Best get your financial affairs in order I think, your chances of receiving a tax audit are on the rise...

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Sadly now -- apart from perhaps the Greens -- there is no party in Parliament awake to the erosion of individual rights in this country.

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tax is so high, why work - go on the dole & leave it to some other sucker

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Fortunately we still carry some cultural heritage that suggests to us it's better to produce than be a bum. Lord help us all we that peters out.

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Stop your winging, Rodney. Oliver Wendell Holmes lived in a time when the entire tax take went to pay for the US military and foreign relations as the government was made up of volunteers. Were it not for modern day taxation we would not have the roading and other infrastructure that allows NZ to compete on the world stage. Admittedly there is waste, but there is also a tremendous amount of energy put into tax avoidance by those that can afford the overpriced CAs who play the system. A flat tax on all earnings is the only way to make the system fair. And to those who say that taxing capital gains will reduce investment, I say hooey. Would you not invest just because the government wants its payback on infrastructure investment? That is a baseless argument.

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A flat tax would be great.

Government spending on defence, transport and communications, and law and order is less than 15 percent of the total.

Welfare is 25 percent.

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Hi Rodney,
Good to see you back on this hobby horse. Tax is of course the other side of government spending. To get tax down, spending must go down. But the political system has now evolved until a complete stalemate has been achieved. Neither the left nor right can get any more headway except tinkering at the edges.
The only way to get tax down now is from grass roots re-evolution of the political system. That system is now merely the election of a nominal king / queen every three years. We call it democracy but what does that mean? Politically, we really have not evolved much since King Henry was around or Parliament was created to replace the king. It never was government of the people, by the people, for the people. That was just wishful thinking by right minded folks who were duped into thinking they mattered.
sMiles

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Ta. And agreed.

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Oh just great. Another ex-MP has a road to Damascus moment when it's too late to do anything about it. I sent you emails to the nature of the police state YOU were creating when you were in power, Rodney. I specifically posted you a long email on a complete rort the IRD were at one stage 'hunting' to do with livestock tax, which amounted to double cross on their behalf. And guess what I received from you? Sweet FA.

We're a police state. Furthermost thing you could think of from the classical liberal, free society ... yes. You got it in one. Bit late not though, ain't it.

Spare us the guilt trip after the event.

A Western Spring is needed to throttle this damned suffocating Big Brother State back ... you got your hand up to lead it?

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I not got any guilt. And i haven't any road to damascus conversion.

My political views and philosophy were settled long ago.

In fact, I hardened them up each day with my experience in Parliament.

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Perhaps the onus reversal of the legislation explains all the stories about the way IRD goes about their job; treating everyone they investigate as tax avoiders. No wonder they ditched the 'it's our job to be fair' logo - it would have been embarassing for the Commerce Commision to find them in breach of the Fair Trading Act.

Seriously, if IRD goes about their job fairly, treating people with respect, hitting hard with genuine avoidance but tolerance for real people trying to get it all right, it would make a massive difference to perceptions about IRD, tax and governmnet. Most people don't mind paying tax, and the vast majority try their best to get it all right, but what people really want is to be treated fairly and with respect; a lot of other govt agencies already do that quite well.

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Indeed it does. The French revenue service much more respectful. No reverse burden of proof there.

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Hubbard!

You are meant to be on holiday.

These issues will still be here in four weeks when you get back.

Log off. Relax. Give the misses some kisses.

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I dont't understand. But i will.

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Two great columns in a row.

Who is this logical, forceful, well spoken person who is getting to the heart whats wrong with this country? The previous Hide column was even better, a real cracker.

Why didn't we see any of this from Rodney Hide MP? All I remember was overseas trips (perks), whining about perks (other peoples) and dancing on television.

The guy writing these columns is who I wanted to vote for.

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Sigh.

That's the advantage of my own column.

And not having to be doing all the things an MP must do.

I did enjoy the dancing though ;)

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Rodney

If you were truly concerned about our taxation why did you not do anything while you were a minister?

There appears to be little or no accountability in the way that our Tax dollar is spent, If the government was to have the same degree of accountability in spending Tax funds as we have in paying Tax then we may just find that there is a surplus.

You advocate one law for all but those on the highest income bracket find ways to avoid taxation and the easy targets, the low income earners, cannot defend their rights as it is uneconomical for them to employ accountants and lawyers. Those in the highest brackets don’t mind how much they spend they simply call their defence a tax deduction .

Taxation is only fair if we are all equally responsible to tax laws and if we have full transparency and accountability of payments made from the public purse.

If we simply began with transparency which ensured that all those including who receive the tax dollar are identifiable so that we can see what our money is being spent on and who is cheating the system.

There is gross corruption in the way our taxes are spent; no one knows how many people are double dipping or how many fictional organizations/ persons are ripping us off.

You know that it goes on I spoke to you years ago and provided you with evidence of a form of corruption known as public office for private pecuniary gain.
You were supportive of me until you became a minister, then you would not let me have an appointment with you despite that fact that you were my local MP .

I have yet to find out how one makes a complaint about corruption when the victim is “the public“. Is it acceptable because there are so many feathering their own nests from our hard earned dollars? Is my case being kept from the public because it will show how truly corrupt New Zealand is?

Rodney You ignored my last post will you ignore this one too and will you sign my petition for an independent commission against corruption ? www.anticorruption.co.nz

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As you well know Grace I treated your concerns respectfully and investigated. They didn't stack up.

I know you disagree with my conclusion.

But please don't bitch that I don't care or didn't perform because I disagreed with your conclusions.

I have been sacked from Parliament. Your mission is to get your MP to take up your concerns. I am no longer a MP.

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You're being a bit dramatic here, Rod: you weren't "sacked from Parliament", there was a change in leadership of the Act Party.

Cheers

Polymer

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Fair point.

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Ineed to think of a quick way of saying there was a change of leadership and the new leader wouldn't let me stand !!

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It sure wasn't the Epsom voters that booted him out of parliament ...

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Hi Rod love your columns. I have a question for you. Was Fat boy-Hunt as much fun as everyone says he was, on that South American sojourn, a few summers back? I heard that he had everyone in stitches over the dinner table.

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Everyone was a lot of fun especially John Carter. But Jo Jo Hunt kept nodding off.

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Bet, he was wide awake when it came to go up to the buffet table; we hear he's got a fearsome appetite.

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So the evidence didn't stack up did it Rodney, You could not have looked at it very closely , you may wish to have a look at the evidence which is very real and does stack up on http://www.anticorruption.co.nz/2012/03/21/why-i-am-calling-for-an-indep....

My local MP is your mate John Banks who signed a prospectus which was false , this is a strict liability offence no intent required just the act of doing it.

People are facing the law every day for unintentionally going over the speed limit.. why dont they get the same benefit of not being prosecuted as he does?

Admit it Rodney theold boys net work is alive and well and the only thing that makes my evidence " not stack up " is that the perpetrator is a Labour Old Boy " and many other necks will roll with him when it finally is exposed.

Isn't it time that the law applied to all equally . Isn't that what the act party is calling for ?

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John Banks has the responsibility now!

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No group of elected or unelected or self appointed group or comittee has , or can claim, any authority not ceded it vountarily by the citizens of any state or nation.

Clearly and by any rationale, our individual and collective rights are being violated through what is now referred to as representative Democracy.. We have become an over regulated failing police state differeing from dictaorships only in degree.

I suggest that we will all be better served by adjusting to a sytem where mandates are more clearly established by referendum. Cumbersome I admit , but if the past few decades ahe proved anything at all it is that Politicians cannot be trusted with presrving the integrity of the rule of law..

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Trouble is that group has the guns. Rightly or wrongly.

Yes. We need mechanisms like referenda to reign it in.

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Perhaps if we had a taxation regime that didn't fleece society in such a draconian way, NZ would enjoy a higher level of compliance?? For example, the introduction of a 15% GST rate in the middle of a recession, was an economic absurdity, from which the country has never recovered (and never will), pending a seismic shift in how the business of NZ Inc is managed and run. This Govenment did itself no favours in claiming that it would reach economic parity with Austraiia a few years out and that circa 170,000 new jobs was iminent

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Whoops, got posted prior to finishing. This is how it should have read...

Perhaps if we had a taxation regime that didn't fleece society in such a draconian way, NZ would enjoy a higher level of compliance?? For example, the introduction of a 15% GST rate in the middle of a recession, was an economic absurdity from which the country has never recovered (and never will), pending a seismic shift in how the business of NZ Inc is managed and run. This Government has done itself no favours in claiming that NZ it would reach economic parity with Australia a few years out. and that the creation of circa 170,000 new jobs was imminent. It’s a joke, but much worse, it leaves people disillusioned and more likely to avoid paying taxes as the law demands. It is no coincidence, that cash jobs are on the rise, and there is no stopping it.

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Right. But we have to have figure out a politically sustainable way of cutting spending. Otherwise pollies are never going to do it.

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The way to collect more tax is to cut tax. Leave it in the hands of the productive. They will grow the economy. Producing more tax. Government doesn't make the world happen. Anyone who thinks that government is creative is deluded. Government only starves, kills, and destroys. Oh, and wastes.

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Correct.

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