Big-name cheats harm tax system

19:32, Nov 15 2012
Taxing Times
Taxing Times is a weekly column that looks at various aspects of tax and money management.

There is a quote from Leona Helmsley that "only the little people pay tax", writes Murray McClennan in Taxing Times.

The billionaire then-owner of the Empire State Building was convicted in the 1980s of extensive tax evasion.

That view seems to be shared by a wide cross-section of people, including politicians.

Spiro Agnew resigned as vice-president of the United States in the mid-1970s partly because of pending charges of tax evasion.

Recently former Italian prime minister Silvio Berlusconi was sentenced to four years in prison for tax evasion. Admittedly, it is likely that he will never serve any of the sentence due to a combination of the Italian judicial appeals system and a law exempting over 70-year-olds from jail time.

In 2010 Christine Lagarde, now head of the International Monetary Fund, gave the Greek finance minister a list of 2059 Greeks with accounts at a Swiss bank to help Greece crack down on rampant tax evasion as it was trying to steady its economy. Having a Swiss bank account was not in itself illegal, rather the implication was that the money came from undeclared income and any interest earned on the deposits was not declared in Greece. Successive Greek finance ministers did nothing. An investigative journalist published the list, which included a former Greek culture minister, several employees of the Finance Ministry and a number of business leaders. Ironically, the journalist was immediately arrested but was acquitted yesterday.

It is difficult to maintain confidence in a tax system that relies on voluntary compliance if famous people and so-called leaders cheat on their taxes, often with impunity.

There is a real risk that taxpayers will also become less inclined to be fully compliant and eventually tax evasion becomes a national sport.

» Murray McClennan is director of Tax Central Ltd, a specialist tax consulting firm.


The Southland Times