Economic crime is costing New Zealand up to $9.4 billion a year according to a draft Serious Fraud Office (SFO) report obtained by Radio New Zealand.

At the beginning of last year the then Minister for the SFO, Anne Tolley, was reported as saying that a number of Government ministries had been working for two years on a report quantifying the cost of economic crime and it would be presented to Cabinet in the near future.

But the report did not make it to Cabinet and was not released.

Radio New Zealand obtained a draft copy of the SFO’s report under the Official Information Act. The methodologies that would have made it possible to calculate the total costs were redacted.

However, Radio New Zealand has also obtained a copy of the report with the estimated costs of the various types of economic crime included – which put the total cost of economic crime at between $6.1 and $9.4 billion.

The report noted that was more than twice the combined annual budgets of police, the Department of Corrections, and the courts; more than the total net profit of New Zealand’s top 200 companies and top 30 financial institutions; or the equivalent of $2000 for every adult living in New Zealand.

By far the biggest component of that $6.1 to $9.4 billion was an estimated $2 billion a year in tax fraud – benefit fraud by comparison was thought to be about $80 million.

The report estimated that just over $100 million or 5 percent of that $2 billion a year in tax fraud was being detected. The figure was close to 30 percent for benefit fraud.

The $2 billion figure could be on the light side. The Tax Justice Network, an international NGO, has estimated New Zealand tax evasion at $7 billion a year and the IRD itself claimed in its 2011/12 annual report that it had detected $1.2 billion in evasion.

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Currently white collar crime goes almost unpunished in New Zealand. John Key and Paula Bennett focus heavily on cracking down on benefit fraud while they ignore the real cost to our tax coffers. As mentioned above, benefit fraud is thought to be around $80 million a year which is nothing compared to the phenomenal $1-6 billion in estimated tax fraud alone each year. 

Dr Lisa Marriott, a senior lecturer in the school of Accounting and Commercial Law at Victoria University has written an excellent article discussing why courts are more lenient on white collar criminals than those who commit benefit fraud which can be found here.

Dr Marriott’s analysis of court data on the most serious offending from 2008–2011 shows that 22 percent of people found guilty of tax offences received a custodial sentence while 60 percent of benefit fraudsters were imprisoned. 

The investigation also shows tax crimes are more costly, with those given custodial sentences committing offences valued at just over $800,000. Benefit fraud averaged $67,000 per offender.

The stark contrast between tax fraudsters and benefit fraudsters is also noted in this Waikato Times opinion article. It’s interesting to note the prison terms imposed on a Rotorua mother of four who netted $51,000 through benefit fraud (a year), a Napier woman found guilty of $167,000 of benefit fraud (two years and one month) and a Warea mother of two who wrongly took more than $80,000 in domestic purposes payments (one year). In contrast, a former property developer and “serial tax cheat” who evaded paying $979,000 over more than 15 years was sentenced in Wellington to a year’s home detention, 275 hours of community work and ordered to pay $25,000.

Not only does this lenient treatment on tax evaders and fraudsters pale in comparison to the harsh treatment of those exploiting their benefits, it also encourages more white collar crime due to a lack in jail convictions. The latest South Canterbury Finance court decision reiterates this point. 

Key & Co, backed by the corporate media however continue the witch-hunt for beneficiary fraudsters while they ignore the elephant in the room. It’s no surprise really that National aren’t going after the wealthy tax evaders, as this would mean going after the voting base which helped them gain a third term. 

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Wake Up NZ is a team of dedicated truth-seekers from all over New Zealand. We are committed to disseminating information that the mainstream media fails to bring to you.

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