Rodney Hide: Greed behind tax threats

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Photo / AP
Photo / AP

It's brilliant. Labour's revenue spokesman, David Clark, has produced the best tax policy yet. It shows perfectly the modern state's rapaciousness. And it's perfectly in step with present-day tax policy.

The policy, plainly put, is to ban Facebook for not paying enough tax. Genius. It's simple. It's clear. It's to the point.

To be fair, the policy is a little more nuanced. Clark explains the government would first sit down with Facebook to ask them to pay more. The "credible threat" would be the ban. If Facebook doesn't cough up they're banned.

Quite how the law carves out the New Zealand corner of the internet is not clear. Perhaps the ban would apply to New Zealanders using Facebook. The banning bit remains a little murky.

No matter. The sentiment is clear: pay up or we will kick you out.

Critics point out that the cost of the ban wouldn't fall on Facebook, but the two million Kiwis using Facebook. That's easily countered. Tax never costs business as much as it costs everyday Kiwis through fewer jobs, lower wages and higher-priced goods.

Taxes mean higher prices, less investment and less entrepreneurial effort. Business doesn't carry that cost; households and workers do.

The Facebook ban is just like the rest of tax policy. It's no different in hurting customers not business.

The cost to the country of raising tax is always way over whatever amount the Government actually takes. But as Clark ably demonstrates, the goal of tax policy is always for government to get its pound of flesh and pint of blood no matter the cost to the rest of us.

Purists also claim that Clark's policy runs counter to the rule of law and overrides some or other sacred constitutional principle. But that ship sailed long ago.

For a start, tax law reverses the burden of proof. The Inland Revenue Department only needs to assert you owe a $1 million and you do. It's up to you to prove you don't. That's tougher than it sounds.

Believe me. I have been there with constituents.

And you might think that you only owe in tax what the law says you owe. But that's no longer true. The courts and the Inland Revenue Department have dumped that principle. We now have in tax law the Contemplation Test. You owe in tax not what the law says you owe but what Parliament would have said you owed if Parliament had contemplated your circumstances. If that sounds nuts that's because it is.

For example, the Supreme Court agreed in 2008 that a taxpayer had properly complied with a provision in our tax law but then concluded that Parliament expressly didn't intend that particular provision to apply. Imagine that. Knowing and following the law as it is written is no longer enough. You have to figure what Parliament actually intended - or rather what the courts will subsequently determine what Parliament actually intended.

It's only a short step from where we are now to having politicians sit down with you to determine how much tax is fair and reasonable and banning your business should you not agree. In many ways it would be clearer and more straightforward than what we have now. At least the shakedown and the politicians' purpose would be clear. And the process simpler.

There would be no need for thousands of pages of tax law, tax experts or wasted court time. It would be just an arm wrestle with the Minister over dinner.

Alas, it's not to be. Labour leader David Cunliffe was initially open to the possibility but following the above criticisms the Labour leader determined Clark had misspoken over the possibility of banning Facebook.

It's a pity. The policy perfectly captures how politicians desperately want to grab all the revenue they can without regard to cost or legal niceties.

- Herald on Sunday

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