Jim Rose: Envy is the biggest gain from public tax returns

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Making tax returns public is a sideshow to the tax havens issue. Photo / File
Making tax returns public is a sideshow to the tax havens issue. Photo / File

The Panama Papers have renewed calls over the last few years to make all tax returns public. This is already so in Sweden and Norway.

Tax returns were public in the United States until the late 1920s. Public tax returns (even if those only of the rich) are a bad idea that will do little to stem tax evasion.

We live in a culture where it is gauche to brag about your wealth. One reason is that knowing someone is better off than you triggers some of the baser emotions in our hearts.

Too many families already squabble over money and resent the success of siblings. Imagine how much more intense these family upheavals will be if we could look up tax returns.

Little wonder that these online databases are referred to as tax porn.

Pacifica people are among many New Zealanders who come from gift cultures.

I am all for family members helping each other out in times of trouble, but we know that some relatives take liberties. Pressure from such relatives will become more intense if they can look up tax returns.

There is plenty of quarrelling over revisions of wills and inheritances. These will only intensify if feuding relatives can look up each other's tax returns to say who does not need a particular legacy.

We all have relatives who are misers. We take that with good grace. But being able to look their tax return to find out how successful a miser they are will not promote good cheer at family gatherings.

Make only rich taxpayers disclose their returns, some say. So as soon as you do well, less successful relatives and friends may suddenly resent you. We have enough of a tall poppies culture as is.

The secret of tax evasion is keeping certain income off your tax return because otherwise it is taxed.

Making tax returns public is a sideshow to the tax havens issue.

In the early 2000s the OECD published a list of about a dozen non-cooperative tax havens. The last of these tax havens was removed from this list in 2009 after signing information sharing agreements.

The secret of tax evasion is keeping certain income off your tax return because otherwise it is taxed.

Leading tax economist Joel Slemrod found that putting Norwegian tax returns online in 2001 increased self-reporting of income by 3 per cent.

This appeared to be mostly small businesses and self-employed in the cash economy not wanting to be dobbed-in by nosy neighbours who knew how well-off they really were. They were tradies taking cash in hand, not ferreting millions offshore to a tax haven.

Robert Nozick wrote that most envy is sparked by small local differences. It is not about some far-off rich.

Envy wells up from the daily reminders of the guy in the next desk who got the promotion you didn't or saved more frugally to buy a slightly better house or car. "Why not me?" is what rankles.

Gore Vidal said that every time a friend succeeded, he died a little. Having their tax returns on the internet would be a death of a 1000 cuts.

Debate on this article is now closed.

- NZ Herald

Jim Rose is a research fellow at the Taxpayers' Union. He has worked as an economist at the Ministry of Business, Innovation and Employment, the Department of Labour, Treasury, the Australian Productivity Commission and the Australian Prime Minister's Department.

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