Sir Bob Jones: The perfect tax code - them not me

Tax and theft. What's the difference? Photo / Getty Images

Property tycoon, boxing aficionado, raconteur and former political leader Bob Jones begins a new weekly column for the Herald today.

There is no more contentious subject than taxation. Debate is invariably couched in disingenuous equity propositions but usually amounts to intellectual dishonesty and often unwitting hypocrisy.

Billionaire Warren Buffet received accolades when he declared he should be paying more tax. No one ever stopped him doing so voluntarily. Note he had this revelation at the age of 80 when his remaining years are few.

President Obama is focusing his re-election campaign on taxing the rich, this aimed at his wealthy opponent, Mitt Romney.

Obama doesn't put it that way, as this would fly in the face of his attempts to cast himself as a non-divisive leader, so instead he talks of fairness. That's nonsense. There's never fairness in taxation, just as there's no fairness in life.

I could write a damned good argument why the rich should pay no tax, indeed, I could write a set of encyclopedias. But I won't because the majority of readers, not being rich, understandably don't want to hear it.

Newly elected French President Francois Hollande campaigned on a populist tax-the-rich cry, promising to introduce 75 per cent tax on higher incomes. Despite the evidence that such measures always produce less revenue, induce capital and entrepreneurial flight and cause economic distortions and inefficiencies, Hollande boxed on, mindful of voter appeal.

That says much about modern democracies in which yesteryear's ideology divide, which once motivated political aspirants, has now been largely replaced by personal ambition with mainstream parties.

There's only one indisputable fact about tax, namely, that by definition it is theft.

Theft is the taking of someone's property by stealth or by coercion which is an accurate description of indirect (sales) and direct (income) taxes. That said, we all reluctantly accept the social contract implicit in tax but prefer it was a lesser burden.

When direct tax rates in New Zealand on quite modest, albeit higher, incomes reached 66 per cent (company and dividend taxes) in the 1970s, the tax avoidance industry boomed, ergo, the affluent paid no tax. For that was the nature of the tax schemes of the time which were absolute and allowed no compromise.

Of course the burden was a great deal higher than 66 per cent, thanks to the raft of indirect taxes.

For example, reformers at the time were fond of detailing 120 different taxes involved in the creation and sale of a loaf of bread.

Then Prime Minister Rob Muldoon, a man uninterested in material possessions to an almost ascetic degree and thus innately suspicious of the wealthy, responded by appointing a highly militant tax commissioner whose approach caused much bitterness. But his efforts were doomed and the bitterness transferred to the PM after one occurrence.

I knew Muldoon and recall his rage and muttering about criminal conspiracy when a combined effort by a large number of businesses temporarily wiped out one region's tax inspectorate by offering them all highly paid jobs.

Some years ago, fishing the Tongariro, I ran across an Australian. He was a nice fellow there on his own so I invited him to join us for dinner.

Lo and behold, it transpired he was the head of investigations for the Federal tax department. Teasingly, I remarked that probably the best advice one could ever tender is simply to not file a return. He became highly excited, declaring that never a truer word had been uttered.

The inspector employment ploy was a different response compared with another tax authority's effort, which I observed when visiting Kashmir on a fly-fishing trip in the Himalayan foothills. I arrived in Srinagar to witness the aftermath of an ill-fated attempt by the Indian authorities to make Kashmiri businesses pay their taxes.

Two days earlier several hundred tax inspectors had, with no forewarning, descended on the city in army troop carriers to blitz Srinagar businesses. The newspapers on the day of my arrival were full of photos of their inglorious retreat. Many inspectors were on stretchers, others had arms in slings, heads bandaged and so on as they boarded planes to take them to safety. A nice cap to this story arose a week later when in Delhi. I saw a large only-in-India billboard bearing the ludicrously untrue Government message, "All Indians respect the honest taxpayer".

My realisation of the universal truth about tax occurred in the early 1990s. Victoria University, from memory in conjunction with the Government, staged a week-long taxation reform conference. "Experts" from home and abroad, the unions, farmers, industrialists, exporters and diverse other sectors presented papers, which were duly reported in the capital's then two daily newspapers. I read them all.

My eureka moment came when I realised they all had a single common denominator, namely less tax for themselves and more on everyone else. As said, that is the universal sentiment on the subject, namely, tax the other fellow but not me.