Editorial: Plenty worse tax dodgers than tradies

We have probably all done it: agreed to pay someone cash because it is cheaper. Photo / David White

Editorial

Crackdown on cash jobs is welcome, but IRD should not forget corporate big fish.

We have probably all done it: agreed to pay someone cash because it is cheaper. Sometimes, probably, we have paid in cash without a discount because the person asked for it and he or she was very nice and did a decent job. Often enough, tradies say, it is we the customers who ask for a cash job. After all, it's only "the taxman" we are depriving.

How foolish that view is if we stop to think about it.

We are all taxpayers, or claim to be when asserting our rights to the benefits and decrying "bludgers". But there is more than one way to bludge on the state. Tax evasion is no better than claiming a benefit fraudulently.

The Inland Revenue Department's latest crackdown on cash jobs, which we reported yesterday, should be welcomed unreservedly. It is true that tradies are not the worst, or certainly the wealthiest, offenders.

Tax evasion is too often excused as legitimate avoidance in corporate finance. Most of it may be legitimate, and we may justifiably blame legislators for the arrangements companies can make, but much more could be done to challenge the ethos in business that tax is something to be avoided where possible.

Those who benefit most from good government, stable economic management, an educated population and a trained workforce should be the last to begrudge paying their share of the cost. Companies that manage to avoid contributing 28 per cent of their earnings in New Zealand to the maintenance of public services should be routinely named and shamed. No matter what reasons they have, or how legitimate they may be, the public should be told who they are.

Better that they are named in an annual report by the IRD, rather than leaving it to financial reporters to expose egregious cases. It would be interesting to see how long sharemarkets would reward tax avoidance if the names of all companies paying less than the standard rate were common knowledge. It might put paid to the canard that companies have a "duty" to their shareholders to pay as little tax as possible.

There is more than one way to bludge on the state. Tax evasion is no better than claiming a benefit fraudulently.

One day, a vigorous government may tackle that task. For the moment, the IRD's target is tradies. For a second year in succession, it is starting a campaign against cash work in residential property projects, particularly in Auckland where it is widely believed more than 25 per cent of construction jobs are paid "under the table". Some of the amounts are said to be as high as $20,000.

These findings come from a survey of builders, plasterers, painters, electricians and the like, conducted for the IRD, which says the result in one respect is an improvement on a similar one in 2012. Asked four years ago if under-the-table jobs were okay, only 27 per cent strongly disagreed. The response rose to 53 per cent in last year's survey. If more than half the industry agrees cash jobs are not okay, the IRD is making progress.

If this view is turned into practice, an increasing number will have an interest in helping the department enforce the law. Cash payments are unfair to competitors who pay their tax.

After this, the IRD is considering broadening its campaign to include hospitality workers and independent contractors. Fine - but it should not ignore the big fish.