Should tax dodgers go to jail?

With prisons reaching capacity and Andrew Little considering a catch-and-release policy as a solution, questions are being asked about whether we should be jailing tax dodgers.

The prisons are near capacity, yet non-violent offenders are still being put behind bars, and not everybody thinks it’s a good idea.
This month, a plasterer and a house builder were both sent to prison for each evading just shy of $1 million in tax.
Auckland builder Hamish Paul Aegerter and Hamilton plasterer Paul Andrew Mills were each sentenced to more than two years in jail.
Mills hadn’t filed an income tax return between 2009 and 2017, while Aegerter “existed largely outside the tax system for 17 years”, said Inland Revenue.
But the tradies’ jailing isn’t welcomed by those who fear the message sent by incarcerating them is outweighed by the roughly $100,000 a year price paid by the taxpayer to keep them behind bars.

What is the main purpose of prison?  Is it prevention – protecting the public by locking up offenders so they can’t carry out their dastardly deeds on anyone else? Is it for punishment?  Are we just being vengeful and want to see people punished?  Is it a deterrent?  Would it stop people from offending if they see others doing the same crime getting time?

DETERRENCE

Professor Greg Newbold from Canterbury University, who served time in prison in the 1980s before becoming an academic, says prison is appropriate for the pair.
“If you steal money off the state, you can expect to go to prison.”
“It has a deterrent effect, a symbolic effect. It reflects the gravity of the offence.”
“Financial crime is likely to be the most easily deterred,” he says.
Violent crime is often committed in the heat of the moment with no thought of the consequences, Newbold says, while white-collar crime is a calculated offence.
“White-collar criminals are calculating, clever, and callous criminals,” he says. […]

PRISON FAILS

“There is almost no situation where I would support using prison,” says Victoria University criminologist Liam Martin. “It is such a dysfunctional place. It doesn’t do what it is designed to do.”

Well, that depends on what you think it should do.

That includes an abject failure to rehabilitate criminals to rejoin society as functioning citizens able to pay their own way.

I know rehabilitation has some arguments in its favour, society as a whole will, in theory, be better if we can stop criminals from being criminals. But what annoys me about it is that we are pouring money into helping people who have broken the law. It’s almost as if we are rewarding bad behaviour. Break the law and we’ll sort you out mate, we’ll give you an education and get you skilled up right nice.  People who haven’t broken the law are expected to make their own way in life.  There is no helping hand for people who already know how to behave.

But Martin agrees on one point with Newbold: “Often white-collar crime is often well thought out by people who are being more calculated in their approach.
“In that situation, prison may work as a deterrent.” […]

FEAR OF DETECTION

Martin’s point is backed by research showing that the magnitude of a sentence is less of a deterrent than the likelihood of being caught.

The US government’s National Institute of Justice says “certainty of being caught is vastly more powerful a deterrent than the punishment”.

“Increasing the severity of punishments does little to deter crime.”

Bernie Madoff was sentenced, for example, to 150 years behind bars for his giant ponzi scheme.

As a deterrent, imprisoning one tax-dodging plasterer may be less effective than the IRD being seen to catch a hundred who get community service, and losing the assets they bought with their ill-gotten wealth.  […]

CHAIN REACTION

Tania Sawicki Mead from charity JustSpeak says sending people to prison sets off a “chain reaction” of consequences that “don’t help anyone”.

The taxpayer stumps up $100,000 a year on aggregate to keep people locked up, and the dislocation from work, communities and family damages people’s ability to be productive citizens when they get out.

On this front, research in the US suggests white collar criminals fare better than blue collar convicts, as they often have better support networks outside prison, on release. But as Newbold points out, a plasterer who dodges tax is not a white-collar criminal.

Newbold says Mills and Aegerter would  serve their time in low security prisons, and would be eligible for parole in after serving a third of their sentences.

First-time offenders tend to serve around half their sentence, he says.

But, he says, “it will be pretty bad for them”.

Um …. Isn’t that the point?  It’s not meant to be a holiday.

“If they have got families, it will be hard on them.”

The Criminal Proceeds Recovery Act was also likely to apply, which could mean assets like family homes get sold, Newbold says.

Sadly that means families are collateral damage.  But we need to recognise that this is the fault of the person committing the crime, not the justice system.

Restitution was important, Marriott said. “In most cases that I have seen, there is little or no restitution made in these tax evasion cases that result in criminal prosecutions.”

“This is important as offenders have usually made substantial gains from tax evasion, which they have kept, so a light punishment signals that there is little in the way of consequence from the behaviour.” […]

PROTECTING SOCIETY

It’s often argued violent criminals are imprisoned partly to protect others from their violence.

The argument is harder to sustain for white-collar criminals.

The public can be protected from financial criminals by supervising them, or taking steps like removing their ability to act as directors, or provide financial services – all steps that are already available.

But Sawicki Mead believes that New Zealand, like US, is a society with a strong vengeance streak, which makes it hard to think beyond entrenched “commonsense” ideas about crime and punishment.

TOO SOFT

Aged 26, insolvency practitioner Damien Grant spent 16 months behind bars at three prisons after he was sentenced to 30 months imprisonment for fraud.

Two decades later, he looks back and concludes he got the punishment he deserved.

He believes all fraudsters should see a cell, rather than decorated with an ankle bracelet.

“If you steal, there is a price to be paid,” he said.

“I think the current sentencing system is too soft. The current regime of giving people an ankle bracelet is … bulls…t. You sit at home playing Xbox.”

Send them to jail.  Build more prisons.


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