From insurance fraud to tax dodges, the figures add up.

Thanks New Zealand. Your collective dishonesty costs me thousands of dollars a year.

Not all of you, of course. But all of us pay a premium in "honesty tax" on our goods, services and taxes to make up for the dishonesty of others. That dishonesty ranges from light-fingered employees to benefit fraudsters.

For example, Retail New Zealand estimates the total cost of retail crime to be about $1.2 billion a year. That equates to a hidden honesty tax of about $709 a household.

Then there's the honesty tax we pay for others who don't pay their school fees, train fares, tax and student loans, or make fraudulent claims on their insurance and/or government benefits.

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Every taxpayer, Housing New Zealand client or Work & Income client who defrauds the system - and court cases show they exist - costs me directly.

This column was sparked when I was buying a croissant in my local bakery and the owner took my cash but didn't ring up the sale. Guess what? I bet that bakery owner won't pay tax on the profits from my croissant and you and I are taxed more because of it.

Then there's insurance. As Insurance Council chief executive Tim Grafton points out, there is a misconception that nobody personally suffers a loss when a customer adds a few extras into their claim. This is fraud and it isn't a victimless crime. Policy-holders pay.

The council estimates fraud amounts to as much as $300 million a year. My share of that is $268 a year in unnecessary annual premiums for a household of four.

Some forms of insurance are worse than others for fraud. Travel claimants are more likely to make a false claim, for example, than life or business interruption insurance policy-holders.

We could be paying as much as 10 per cent more in travel insurance premiums than we need to for the dishonesty of others.

"We see all kinds of attempts to manipulate the system," says Craig Morrison, chief executive at Southern Cross Travel Insurance.

"Everything from implausible accounts of theft and unlikely items added to a genuine claim, to completely fabricated claims, including false testimony and fabricated documents."

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One Southern Cross customer was found to have the $6000 of jewellery she claimed to have lost still in her handbag when an investigator called.

With health insurance the problem is both fraud by customers, and medical providers that think it's okay to bump up the bill to the health insurer. You and I pay for their greed.

ACC's fraud investigations add up to more than $18 million a year in recoveries and savings. That's only $16 for my household, but doesn't include the ones that get away with ACC fraud.

One Southern Cross customer was found to have the $6000 of jewellery she claimed to have lost still in her handbag when an investigator called.

Like insurers, many Kiwis consider the Inland Revenue Department (IRD) to be fair game and avoid paying vast sums of tax and student loan repayments. Underpaid taxes could fund many times the cost of melanoma drugs that the country allegedly can't afford.

In an extensive worldwide study, the Tax Justice Network estimated that the shadow economy (illicit or undeclared economic activity) in Oceania, which includes New Zealand, was the equivalent of 14.1 per cent of GDP. The researchers noted that figure equated to more than half the region's health-care spending. If those estimates are correct there could be $7.5 billion of earnings in New Zealand that is escaping the tax net.

Likewise, fraud against Work & Income costs us money. The Ministry of Social Development says fraud debt that can be recovered in relation to successful prosecutions in the 2014-15 financial year was $31.1 million. That's good news for my back pocket, but it doesn't include the fraudsters that got away with it.

In the scheme of things, benefit fraud isn't as costly to you and me as tax fraud. A Serious Fraud Office draft report obtained by Radio New Zealand and quoted by Herald on Sunday columnist Paul Little last week found that tax fraud accounted for $2 billion a year and welfare fraud $80 million. Only 5 per cent of the tax fraud was being detected, the report said. Finance and insurance fraud was worth $549 million. Total fraud is $9.4 billion a year, according to the report.

This column isn't meant to be quantitative. One could study this for a lifetime. What's more, some figures are difficult to detail. Associate professor Alexandra Sims, at the University of Auckland's business school, points out that the amount of alleged movie and music piracy, for example, isn't what the recording studios claim it to be. The figure bandied about by the studios relates to downloads that people mightn't have made otherwise. It is likely, however, that we pay some sort of premium for the others' illegal downloads.

There are secondary costs to tax evasion and other dishonesty. For example, it costs to keep fraudsters, burglars, and tax cheats in prison. According to the Corrections Department, there were 316 prisoners whose most serious offence was dishonesty in the 2014-15 financial year, costing taxpayers $100,000 a year each.

Then there are fines. The Ministry of Justice collected $77.79 million in 2014-15. Data matching between Inland Revenue and the Ministry of Social Development has resulted in significant falls in the amount of outstanding fines and reparation, which makes my wallet happy.

There is no end to trying to quantify honesty tax. Treasury did some work a few years back looking at the cost to the government (which means taxpayers) of offences against private property. The total came to $1.102 billion in one financial year. The report looked at costs to government departments including Police, Courts, Justice, Corrections, CYFs, the Serious Fraud Office and others. The $1.102 billion breaks down to $979.56 a year for my four-person household.

That figure, however, didn't cover the losses to individual victims. What's more, the research pointed out that crimes against property can have indirect costs such as the loss of tourism.

Or taking it one step further, financial crime could result in Kiwis choosing investments that are too conservative thanks to their fear of the financial services industry.

Let's not forget that multinational companies also use sneaky, if not illegal, means to avoid paying the tax that could in turn fund drugs to save dying Kiwis' lives.

Inland Revenue took the four big Australian-owned banks to court for this and won $2.2 billion in costs as well as stopping the practice. But plenty more global corporates are allegedly using the law to avoid paying the same rate of taxes as Kiwi-domiciled companies do.

The antidote, I believe, is positive persuasion through peer pressure. Begin with your children.

When they come home, as they inevitably will do, with someone else's property and talk about "finders keepers", explain that this is theft and ask how they would feel if the same thing happened to their prized handball or scooter.

The language we use in discussing fraud and its effect on us can make a difference.

One letter sent to late taxpayers in the United Kingdom explained that even if one person fails to pay their taxes it reduces the services and resources provided. The tax take jumped thanks to that campaign, says sales linguistics expert Steve Martin writing in the Harvard University Press.

Vote with your feet and spend your money at local companies that ring your purchases up and don't have offshore operations they can use to cut their tax.

And like me, pay with Eftpos, not cash, at businesses that you suspect are not declaring income, and ask for a receipt for the purchase.

When paying your builder, don't accept the "cash price". Pay that amount anyway and tell them that you don't approve of them ripping off honest members of the public. Consider recording such conversations.

If you hear conversations about people defrauding Work and Income or the insurance company, don't ignore them. Take appropriate action.

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