Hypocrisy and the cost of crime

Written By: - Date published: 7:54 am, October 21st, 2014 - 57 comments
Categories: benefits, class war, crime, law, scoundrels - Tags: , , , ,

RNZ had an excellent weekend piece on the cost of crime:

Economic crime costs up to $9.4bn

Economic crime is costing New Zealand up to $9.4 billion a year according to a draft Serious Fraud Office (SFO) report obtained by Radio New Zealand.

At the beginning of last year the then Minister for the SFO, Anne Tolley, was reported as saying that a number of Government ministries had been working for two years on a report quantifying the cost of economic crime and it would be presented to Cabinet in the near future.

But the report did not make it to Cabinet and was not released.

Why didn’t the report get published? Why did RNZ have to use the OIA to get it? The Nats (Michael Woodhouse) say it was because they had concerns about the methodology. What they mean, of course, is that they didn’t like the results:

cost-of-crime-2014

National spends much of its spin and legislative effort demonising benefit fraud. It is a tiny fraction of fraud over all, which is completely dominated by $2Bn of tax fraud.

The report noted that was more than twice the combined annual budgets of police, the Department of Corrections, and the courts; more than the total net profit of New Zealand’s top 200 companies and top 30 financial institutions; or the equivalent of $2000 for every adult living in New Zealand.

By far the biggest component of that $6.1 to $9.4 billion was an estimated $2 billion a year in tax fraud – benefit fraud by comparison was thought to be about $80 million.

No wonder the Nats tried to bury it. Go read the full article on RNZ, plenty of other interesting stuff in there.

My conclusion (which should sound vaguely familiar) – our priorities as a country are completely screwed. If we put as much energy into cracking down on economic crime as we did chasing welfare cheats – we could afford a proper welfare system…

57 comments on “Hypocrisy and the cost of crime”

  1. One Anonymous Bloke 1

    Concerns about methodology are the equivalent of whining that the model is wrong.

    Is the methodology so broken that the model is useless? Of course not, and in all circumstances the obvious next step is to improve the methodology.

    It’s tempting to conclude that the problem for the National Party is that they don’t want anyone following where the money goes too closely (I am forcibly reminded of Lester Freeman. Not to mention Clay Davis. Sheee-it!).

    Edit: what a crying shame that lots of information about the model is available somewhere the National Party can’t ratfuck it 😈

    • Draco T Bastard 1.1

      Is the methodology so broken that the model is useless? Of course not, and in all circumstances the obvious next step is to improve the methodology.

      Yep. The correct path was to publish the results and make a fact based critique of the methodology. The fact that National didn’t do this indicates that the failure to publish was simply because they didn’t like it.

      It’s tempting to conclude that the problem for the National Party is that they don’t want anyone following where the money goes too closely

      I’m pretty sure that’s exactly their problem with it. Just think, if the tax fraud alone was tracked and properly accounted for the profits of the top two hundred firms in NZ would effectively disappear which means that accumulation of money to the wealthy bludgers would seriously decrease.

      Quite specifically, what such a report is showing is that business can’t make a profit without ripping off the country.

      • RedLogixFormes 1.1.1

        Or more accurately – the only profits that remain are to be made are from ripping off ordinary people with less influence and power.

      • greywarshark 1.1.2

        Rock stars often find that their managers fiddle the books, and leave them with large tax bills, and little working capital or investments.

        Our rock star economy is then working true to form, and it’s not the Nat government’s fault, the others in private enterprise do it too (even if Labour didn’t). And if Labour didn’t seem to bend the rules and the books, it’s just because they haven’t been caught out by being audited ‘properly’.

        Everyone knows that Labour can’t and don’t do anything right, NACTs are always reminding everybody of this until the public have accepted it like trained Pavlovian dogs. It’s a real bone of contention.

    • NickS 1.2

      All models are wrong, some are just less wrong than others 😈

      But yes, if they’re going to whine about methodology, but not state what’s wrong with it, that’s usually a sign someone is bullshiting, and Woodhouse’s statement here:

      “The work previously done to quantify the cost of economic crime in New Zealand was based on a methodology developed overseas. In the course of the work, it became clear that the methodology was not directly applicable to the New Zealand context.

      Is pretty damn weak, how was it not applicable? Was it over/under estimating, or missing various types of frauds?

      And as the Minister for the SFO shouldn't he know the specifics of the problem?

      And why weren't these issues picked up during the initial research? As usually methodological issues show up pretty early on in the design stage, where a research group is nutting out the foundations of the paper. The ones that make it past this stage are usually due to lack of expert knowledge, but in this case they were collaborating with the people in the UK who did the original fraud estimation work.

  2. just saying 2

    We can afford a proper social security system now. Affordability is not the reason we don’t have one. Let’s not repeat this narrative, even to emphasise another important point.
    How much tax revenue was spent bailing out SCF investors?

  3. Sabine 3

    1. surely no one expects the PM and his cronies to dob in their mates. Really what are you thinking.
    2. would it not be awesome if we had some opposition parties that could have a statement of two on the events of the country.
    Alas, the Greens are silent, the Labour Party is in a Pillow fight for who will be leader in the place of leader ad NZ First might have something to say.

    Missing Hone, muchly.

  4. Phil 4

    Here are the highlights of the methodology section.

    “… as this first Cost of Economic Crime Report is essentially a stock-take of exisitng information, no new data collection activities or surveys were undertaken.”

    “Where a figure for detected or undetected fraud was provided… it has been used without adjustment.”

    “Total fraud (detected and undetected) is therefore almost entirely based on international benchmarks.”

    This is, quite frankly, a terrible way to quantify fraud. The SFO has not approached this report with any statistical rigour whatsoever. Data has been accepted without sufficient validation and the cross-checking of results against international peers is hand-wavy and vague at best.

    If I were Woodhouse and the Nats, I would have tossed this report back at the SFO and said “get off your asses and do it properly”.

    • left for deadshark 4.1

      One thing i’m sure of,Jester Borrows stated in Parliament,in relation to the bill penalizing beneficiary partners.Q + A from opposition member,(they spent four times that amount on all other fraud)in relation to monies spent on welfare fraud.that is a fact,only four,thats pitiful go check Hansard.

      that would be earlier this year,maybe late,the previous year.

    • Aaron 4.2

      so what are you saying – welfare isn’t a tiny component of fraud in this country?

      Other figures I’ve seen: Yearly benefit fraud cost $23 million, yearly tax dodging cost between 0.5 to 6 billion. The estimate for tax fraud is at least more honest because by definition there’s no actual records of lost tax and it’s a bit of a stab in the dark.

      As usual in these debates though there is no discussion about where that money goes. If it’s the local tradie doing cash jobs then at least that money is spent back into the local economy (with other taxpayers having to pick up the slack). If it’s the local multinational corporation of course unpaid tax immediately goes overseas.

      • Phil 4.2.1

        so what are you saying – welfare isn’t a tiny component of fraud in this country?

        No, I’m not saying that. I am saying that this report is a terrible starting point for understanding the size and scope of financial fraud.

        If it’s the local tradie doing cash jobs then at least that money is spent back into the local economy… If it’s the local multinational corporation of course unpaid tax immediately goes overseas

        That’s overly simplistic thinking. There is likely to be a much higher incidence-rate of local tradespeople taking on cash jobs and not delcaring income. If that cash is spent on imported goods (new iPhone or samsung LCD TV) it isn’t going “back into the local economy” at all.

        • Aaron 4.2.1.1

          If you don’t want to be simplistic we should say that a portion of the undeclared money spent by tradespeople is spent on products from overseas and that a portion of that portion goes overseas (to manufacturers and shipping companies) but thanks for the insult.

          And you’re right that most of the official tax dodging is from small business people, the corporates tend to make sure their tax dodging gets legalised.

          Another interesting point too, a lot of tradespeople actually pass on the savings for cash jobs to their customers and are just happy to avoid all the bookwork.

          My main point however is that the way we talk about economics in this country is so bad that we might as well not bother. Out little debate illustrates how fuzzy a lot of this stuff is and consequently the only things I know I can be sure of are that benefit fraud is a much, much smaller problem than tax fraud and that neither are as big a problem for New Zealand as the money that gets repatriated overseas.

        • Draco T Bastard 4.2.1.2

          No, I’m not saying that. I am saying that this report is a terrible starting point for understanding the size and scope of financial fraud.

          Actually, it’s an excellent starting point. Why?

          Because it shows:

          1. That we have to deal to the fraud and
          2. Where we need to tighten up the figures

          Which pretty much defines a good starting place.

        • b waghorn 4.2.1.3

          The obvious way to stop petty fraud buy tradies is to create a cashless society .

          • adam 4.2.1.3.1

            I argue the avoidance of GST and other flat taxes to be a good thing. Anytime we show up flat taxes as the route they are the better.

            Also as the state in the hands of this lot is so corrupt – is it not your duty, to not uphold that corruption, as a honest, fair minded citizen?

            Those who help working people by making it cheaper for goods and services are the good guys, not the bad.

            Can some on the left get over their love affair with the state – this lot have used the state to punish and brutalise people ffs. And that is not a historical anomaly – it’s business as usual.

            • One Anonymous Bloke 4.2.1.3.1.1

              “The State” is such a trite and reductionist description of the way government functions in Aotearoa, that its use as a rhetorical device seems almost dishonest, Hootonesque, if you will.

              • adam

                The face of the elites, who use instruments of manipulation and control like, the courts, parliament and the media. When threatened will use brutal force and violence – via agents like the military and police to enforce their will. That is the state I mean OAB – did you think I meant something else?

          • Draco T Bastard 4.2.1.3.2

            Not just petty fraud – all fraud. In fact, you can pretty much throw in all crime that involves money including theft.

            • b waghorn 4.2.1.3.2.1

              At risk of contradicting my self I just read a article at a sight called new American and it raised the point that it might not be a good idea to become a cashless society if you’ve got a run away government that could then track all your spending habits and use that information against you. I guess we would have decide if the benefits are worth the risk.

              • Draco T Bastard

                As long as the government remains unaccountable to the populace we have that problem. Just look at the laws on surveillance that this government have passed.

                In other words, we need to change the present system. At the moment we have an elected dictatorship and we need to change that to make the people the government and our elected representatives our servants.

                Oh, and I’m also sure that this government would be against being a cashless society as their own crimes would rapidly become apparent.

    • adam 4.3

      BFW – seriously, any government worth it’s salt would have got this sorted – rather than sit on it.

      This is just another example of distraction, fiddle and waffle.

    • NickS 4.4

      🙄

      As far as I can glean from the draft, what they used was government report figures, which are usually taken as statistically valid unless there are prior known concerns, along with international estimates, which have likely already been put through extensive review. About the only time you generally review data in depth in research is when it’s observational/test data your group has gathered, it’s poor quality, comes from a dodgy source or you’re looking for statistically significant signals others have missed or not looked for (preferably not fishing for P-values though…).

      And while yes, the report could have done with more and better sourcing (page/journal numbers, more peer reviewed stuff) they do state in the introduction and forward the known problems with estimating fraud on both the global and local scale. Also, they are using relatively robust (for rough estimates) sources if you’d bothered checking the citations.

      But hey, why critically read when you can quote mine instead? It’s so totes easier, until someone notices it that is…

    • Murray Rawshark 4.5

      What evidence do you have that the international benchmarks do not apply to Kiwi fraud? What’s so different about our paragons of business that you’d throw this report away?

  5. Aerobubble 5

    Key retook govt because he bailed out mortgagee NZ. The more in debt the more income you must have and so the bigger tax drop was required. The problem. Key assumed that the GFC would eventually end, and I suppose Labour would rebalance the tax system. The GFC however was the market failure from peak oil and not about to be redressed anytime soon. So for key to keep bailing out mortgage nz, he will continue to have to sell, borrow and cut. Key recognized this admitting lower and middle NZ would get a tax cut, and that can only come from tax on wealthier nz.

    • leftie 5.2

      @Aerobubble

      What tax cut? Are you referring to the one that may or may NOT come in 3 years time in 2017?

    • Lloyd 5.3

      Surely a significant reason for the continuation of the GFC is the neo-liberal policies being applied in almost every country except China. If you keep wages and benefits low and give tax breaks to the rich the outcome will be a depressed economy, because the rich don’t have to spend their money. Replace the neo-liberal economic policies generally in vogue across the large economies of the world with Keynesian policies towards the poorer members of society, tax the rich hard to pay for those benefits and increased wages of public servants and any worry about peak oil will vanish.

      • aerobubble 5.3.1

        Neo-liberal policies came into being as cheap high density middle east oil began to flow. The relaxation of financial limits has allowed for massive gearing, leveraging a small about of money into become trillions. The GFC correction was the market realization of a basic physical law, that flows of the cheap oil would contract and disappear, on which the high leveraging was based. Hence. GFC is a fact of life. Key, due to the tyranny of distance, was far enough away from, essential to, and yet poorly managed enough, with a Chinese boom. I mean if you pay over the odds, a risk premium on interest rates, you are likely the last the banks will come calling on. Now Key’s no economic div, he could see that mortgagees foreclosures were going to eventually hit NZ too, and so he quickly started borrowing (thanks to Labour), promised to sell prime assets (flying his ministers too Europe to talk to rating agencies), start cutting services, while rushing a tax cut that magically matched up with income tax payers mortgage obligations. The million dollar mortgages needed a larger income, so got a larger tax windfall from Key, those at the bottom got nothing yet paid more GST.
        Now Key, rightly claimed he was still a believer in progressive taxation, that he believed in welfare too, he’s not stupid, just because the rank boring reiteration of flat taxes and benefit baiting that comprises much of what passes for entertainment news nowadays, does not make it so in anyone’s reality. Key also clearly understands that NZ has not had the impact of the GFC, the rise in petrol prices was buffered by the Chinese baby dragon year boom, as Chinese babies move onto solids, the demand would drop. So the the great tax rebalance cannot last, the lower and middle income earners (those who out of mortgage swan off Key and those in mortgage strife thank he for letting them sell on, lock in low rates, etc). The party however is coming to an end, Key keenly aware he needs to raise taxes back up on the richest, and reinstate the former balance. Else election defeat will be assured. Key keenly understand he needs partners in Dunne, Seymour, Maori parties, so no running off and dictating with his majority.

        Peak oil, abated by markets, for now. The pincher though is going to continue to pressure, oil becoming more expensive and climate change forcing investment in change.

        So yes, Key is a prick, as could be seen in parliament today, openly letting people see when he’s not PM he happy to associate with a nasty piece of work.

  6. wekarawshark 6

    Can someone please work out what % the welfare fraud is? (use say 7 billion as total).

    I saw something the other day, wish I had bookmarked it, that was talking about the govt’s fraud figures including overpayments where no dishonesty was involved. Would be interesting to know which figures the report was using.

  7. wekarawshark 7

    Thanks adam. I got 1% but thought that can’t be right (too low).

    • adam 7.1

      No Weka, it is that low. And of that at least 80% of so called fraud, is a mistake by winz staff – then fixed and the person repays.

      It’s a very, very bad joke, which keeps getting told over and over.

      • One Anonymous Bloke 7.1.1

        Not mistakes: a natural consequence of the fact that benefit is paid before income is declared. It takes a spectacular level of dishonesty to misrepresent that as “fraud”.

        • adam 7.1.1.1

          Nailed it in one OAB

        • greywarshark 7.1.1.2

          @ OAB
          It is also likely to result in overpayment because of the narrow way that income is counted and how it must be accounted for on a weekly or fortnightly basis, so the benefit might have to be partly repaid in the next short period.

          It must be hell for the worker in these days of peculiar, lack of committed hours and regular shifts. Easy to be always in a state of uncertainty, it is certainly not a state of democracy that shows respect to all citizens.

          • adam 7.1.1.2.1

            But to count that as fraud – does nothing more than inflate the figures for political purpose.

            • One Anonymous Bloke 7.1.1.2.1.1

              Another example of sophistry employed in the service of deceit, which characterises so much right wing “philosophy” these days,

          • wekarawshark 7.1.1.2.2

            with some benefits income is assessed yearly. I don’t know why WINZ use the set up they do (apart from the obvious) ie they could actually make the system more functional quite easily. Long term beneficiaries declare yearly, short term weekly/fortnightly, medium terms monthly or quarterly. Better yet, let the beneficiary decide (in consult with a WINZ advisor?).

  8. dave 8

    Its the wankers at the top where most of corruption comes from its mostly management a truth this government doesn’t like oh dirty politics proved key and Co are corrupt

    • greywarshark 8.1

      @ dave
      The trouble is that now and then some really blatant beneficiary scams come along and the RWNJs start foaming at the mouth. Nothing but a baseball bat to the system is going to cool them down and so everyone suffers.

      Those on the gravy train feel superior, make happy comments to each other about these lazy, wasteful people and the whole merrygoround starts again with less goodwill and less funding and supportive encouragement.

      They want every post to be a winning post, someone on welfare fails probably because the only way they can manage is by fiddling the system. But then the system is called broke, useless, and expensive but properly run, it can be a little cheaper, and the outcomes are more people doing some work and there would be support for good parenting by learning, and learning to acquire skillsets for a new wort of worker who would have broad rather than narrow skills and capability.

      Deliberate frauds by people in positions of trust and ethics are not regarded so badly. They have just ‘fallen from grace’, but fallen, graceless bennies are beyond the pale.

  9. greywarshark 9

    National spends much of its spin and legislative effort demonising benefit fraud. It is a tiny fraction of fraud over all, which is completely dominated by $2Bn of tax fraud.

    Add to the word ‘dominated’, that of ‘overshadowed’. Welfare $80,(000,000) compared to tax evasion, $2000,(000,000).

    The figure is $80 million on welfare fraud (and this is always open to scrutiny. as to whether it was actual fraud, or someone being overpaid by mistakes in the Department.

    If the beneficiary knows and understands that the figure is wrong, and has tried to get it altered, then it is not fraud, it is inefficiency of the Department. And remember there are loss large tax payers and a lot of beneficiaries for various reasons – old age, lack of employment because of destruction of the economy, by deliberate government policy.

    • One Anonymous Bloke 9.1

      No: the overpayments are inevitable because of the way the system works: any given week’s benefit is calculated on the previous week’s earnings.

      • greywarshark 9.1.1

        OAB
        I knew there was some crazy system. Thanks for detailing it. They are so afraid that they will pay out some little sum too much that they want constant accounting and that is expensive in beneficiary time, and no doubt wages, and in the office and tech time in keeping count. Once a month settling would be better. Or of course UBI with a simplified checking system which would increase unemployment with WINZ clerks being let go.

      • wekarawshark 9.1.2

        “No: the overpayments are inevitable because of the way the system works: any given week’s benefit is calculated on the previous week’s earnings.”

        I’m not sure your implication is correct OAB. I’ve been assuming that the overpayments being lumped in with fraud are the really big ones ie ones that go on for months or years.

        You can’t calculate on future earnings, because they vary so much. That’s not why overpayments are happening. They’re happening because the system is too complicated, and WINZ are basically adminstratively inept.

  10. Wht NEXT 11

    The opposition should be doing everything to make theis pack of ratbastards called the Nat govt to do what the nation requires of them “fix it or fuck off ” namely that thieving Key who knows all to well how to hide his dough and stop BSING us

  11. Penny Bright 12

    Fellow anti-corruption watchdog – Grace Haden – has a petition for a NZ Independent Commission Against Corruption before the Law and Order Select Committee.

    Penny Bright

  12. AmaKiwi 13

    @ Anthony Robins

    “My conclusion (which should sound vaguely familiar) – our priorities as a country are completely screwed.”

    National lives by the Golden Rule: “Them what’s got the gold makes the rules.”

  13. Dont worry. Be happy 14

    Seems weird for the Govt to be dissing this report into fraud based on methodology given that, in choosing those who will compile any report, the Government signs off on the methodology.

    Did they sign off on this methodology in order to be able to diss the report when and if it caught the wrong bunch of crooks (ie the ones they play golf with, the upright citizens who donate to their continued “election” or are asked to God parent their offspring)

  14. Scottie 15

    There is no excuse for the National Government not to vigorously chase public/ business tax fraud, the information makes this clear. Picking on beneficiary fraud is just picking on the low hanging fruit. National needs to throw some money at this, it will pay for itself by the revenue it will gather from fraudulent business and contribute to a more equal society. How can they justify not doing it?

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