David Clark | Issue 8

David Clark | Issue 8

Tax fairness

Until the Panama Papers were released it was believed that two things were certain – death and taxes.  Now it appears just one thing is certain. That’s because the recent release of the Panama Papers has pushed the question of tax-fairness to the top of the agenda once more.  

New Zealand’s reputation for equity and fairness makes it a desirable place to live and work. That’s why it’s unfortunate that New Zealand is now being marketed as a ‘respectable’ tax haven. Having already slipped from the least corrupt country to fourth in the world under the present Government, it is more urgent than ever that we move to protect our reputation for fairness.

Things like hospitals, schools, roads and courts are required for a successful society.  Any debate about tax reform should begin with the question of how much tax is required to fund the services we need to build a fair and decent society.  Very quickly though, the debate shifts to ensuring everyone pays their fair share.

It seems a reasonable principle that those who have benefited most from the infrastructure, society and education contributed by previous generations – should be obliged to pay forward in equal proportion. But as stories of tax avoidance become more widespread, and inequality grows, people are wondering if this will ever happen where the ultra-wealthy are concerned.

James Henry, former chief economist at global consultancy McKinsey estimated in 2012 that US$21 trillion of the world’s wealth is stashed in tax havens.  In 2013 the Economist magazine reported that “freeports” had emerged as a response to threats to crack down on traditional tax havens. Freeports involve warehousing hangers alongside airport runways where the ultra-wealthy can store and trade treasures and collectables – permanently in transit.

The OECD says inequality harms growth. It estimated in 2014 that inequality held New Zealand’s growth back 15 percent in recent decades – more than any other western nation.  While inequality will always be in the community, what matters is its extent, its direction and its causes. The increasing imbalance between the ultra-wealthy and the rest of us hurts the economy and divides the community.

The release of the Panama Papers has brought into question whether New Zealand is a tax haven and whether or not the world’s wealthiest few are paying their fair share of tax. Our Prime Minister’s hesitancy around fundamental issues of fairness show he is increasingly out of touch with Middle New Zealand.

This article first appeared in Issue 8, 2016.
Posted 11:59am Sunday 24th April 2016 by David Clark.