A Spin Doctor's Reminiscences of the IRD Inquiry

Let me begin with an apology. For just a few short months last year I had the opportunity to do to IRD what they have been doing to us for the last 109 years — for once it seemed that we had all the power that they enjoy everyday. I had the mad idea that they had to answer to us.

The Finance and Expenditure Select Committee's Inquiry into the powers and operations of the Inland Revenue Department was supposed to change things. It was supposed to put things right. It did neither.

Alas I was wrong. We never really had the power — absolutely nothing has changed in the IRD since the Inquiry. They got away with it.

During the time of the Inquiry I was Parliamentary Press Secretary cum researcher. I was one of the guys that talkback callers complain of as "overpaid spin-doctor media-manipulators." The real McCoy. It was my job to make sure that my MP got into the news. I schmoozed my way around the press gallery, plotted and planned. I was pretty tough and cynical. I was a professional political dirty worker and I loved my job.

How could I have been so naïve and stupid to think that Parliament would bite the hand that feeds?

My apology therefore is to every taxpayer who has ever been harassed or bullied by the most powerful department of state and has felt that they are powerless to do anything about it, and to every taxpayer who came to the hearings and gave a submission, expecting to see justice done.

When I look back at the Inquiry I have a lot of "If onlys" when I think about it. I feel that if I had done things differently then some real change could have occurred within the IRD.

The Inquiry took a routine that I found oddly disturbing. Hour after hour around New Zealand tax victims would give their testimony. Then IRD would give their spin, which almost always was factually incorrect, and always placed all the blame on the shoulder of the tax-payer. The members of the committee would shrug it off and then we'd all have coffee, before hearing more stories.

To my absolute amazement, the media did not want to know about the taxpayer stories. Once, a journalist informed me that she was not coming to any more hearings because "it's all a bunch of sob-stories from tax evaders." But what I found most disturbing was the attitude of the actual MPs.

For almost three months I sat in the hearings listening to taxpayer after taxpayer tell of harassment and bullying at the hands of the IRD, only to have the taxman deny that they ever did anything wrong, and even worse to have our own Members of Parliament not only side with IRD, but actually go on the offensive against tax victims. It was obvious that IRD was supplying dirt on submitters to friendly members of the committee.

I knew I wasn't dealing with normal human beings when after a submitter gave his 'sob story' to the committee and demanded that the Committee take action against the IRD, Alliance MP John Wright asked: "Well how else do you think we should pay for things like schools and hospitals?"

This one sentence staggered me. Here was an elected Member of Parliament, charged with protecting our rights and freedoms, and with seeking out justice on behalf of citizens, actually advocating taxpayer abuse.

Think about that line for a second.

"Well how else do you think we should pay for things like schools and hospitals?"

Think about what that says — in essence this sanctioned IRD's abuse of a taxpayer on the grounds that the money the IRD brings in is far more important than the rights of the taxpayer from whom it is being extracted.

That statement and the see-no-evil-hear-no-evil attitude of the members of the Select Committee helped me realise a terrible truth. Our elected officials in fact have a gentleman's agreement with IRD — they agree to turn a blind eye to what the taxman does to taxpayers, so long as IRD promises to supply them with the loot. It's that simple.

The do-gooders in Parliament are not interested in your views, they are not interested in your opinions, or even in protecting your rights or in seeing justice done; instead they are very interested in extracting from you as much money as possible in order to fund their ever growing schemes and to fuel their pet projects. IRD are fully aware of this and exploit it to the maximum. In the hearings they constantly reminded the committee of what the money they extract pays for. This is not a view I've just come to, this is the view of a guy who has worked in the system.

If I was mildly cynical of the political process before the Inquiry, then I hold a deeply bitter and cynical view of how the political process operates now. For two years of dealing with the IRD campaign it seemed that I was in a conspiracy-theory movie — here was this huge injustice being perpetuated and it seemed that no-one could give a

damn.

Take the tragic story of Ian Lee Mutton. By now the facts are well known. Mr Mutton was hounded into suicide by the IRD, who refused him relief and hounded not only him for tax, but also his widow after his death. To this day IRD have not admitted any guilt or been willing to take even a small blame for their actions — their tactics have been at once chilling and typical. When the case first broke on the Holmes show, IRD's automatic response was to deny any wrongdoing and then to put their own spin on the issue.

The Inland Revenue PR machine initiated a character assassination of Mutton — they bandied around the media stories about Mutton's bad language and most sickeningly they implied that the real reason he had killed himself was because of a drinking problem: IRD were not to blame, Mutton was just some drunk loser. They told journalists that whenever they dealt with Mutton that they could smell drink.

Towards the end of the Inquiry, IRD Commissioner Graham Holland presented his case. He said that IRD were concerned at the allegations levelled against them, but were working really hard to fix them. When asked about the Mutton case, Holland said that IRD had done nothing wrong, and could not be held to blame.

The sob-stories went on and on for months; here are some of the worst:

Gerald Sommerville was fixing a tractor tyre on his farm. It exploded on him. He was in a coma on life support for a week. They just managed to save his life — he had massive internal damage to his liver, stomach, pancreas and one of his legs was literally hanging on by a thread. He had upwards of 30 pieces of metal in his body.

The doctors worked out what dose of pain-killer would actually kill him and then backed off a little bit.

Three weeks into his stay in hospital three guys from IRD showed up at his bedside and proceeded to interrogate him on why he hadn't got his tax return in (I'm not making this up). Half way through the interview the tax guys had to leave the room so that the nurse could change his drip. The result? you guessed it-the IRD judged that he did not have a reasonable excuse for not filing a tax return.

One guy I remember very clearly had been hounded by IRD so much that his nervous system had given out — all the hair on his body had fallen out.

Horse breeder Ron Denby was put out of business by IRD, and was then forced to sell his life's work at rock-bottom prices in a stand-over sale. What really disturbed me was the way that IRD officials mocked him at the back of the room, imitating his strong English accent.

One day an IRD official walked onto Jan and Murray Willis' business (unlike the Police, IRD can do that without permission) and demanded payment for ACC arrears. To cover a stuff-up IRD had actually forged a letter and claimed that they sent it to the Willises (they tabled both letters). I informed the fraud squad, who told me that they were seizing the documents from the IRD. Unfortunately that's where it stops — IRD have not allowed the Police to continue their investigation. Meanwhile the Willises have been bankrupted.

The committee heard from Gordon and Hugh Spiers, who were told by an IRD auditor that she was not interested in their money, but wanted to use the power of the IRD to bankrupt them (which they did). The auditor just happened to be the wife of their main competitor.

Clearly this is outrageous behaviour. It's the sort of stuff you'd expect to get in South American or African military regimes that gets Amnesty international and the UN jumping up and down, but it's happening right here in good old New Zealand — the first country to give women the vote and a country that plays test cricket.

IRD never admitted any wrongdoing whatsoever in any of the hundreds of sob-stories that came before the Committee — they instead said that they were "isolated cases." But even if the cases we heard in the Committee were the only examples of abuse (which they're not), it would still be enough to say that there are serious problems within IRD.

All this had an effect on me personally. After hearing evidence I found myself questioning my profession — I found myself walking around Wellington streets at 2am searching for answers and finding none. IRD even tried to spook me — one tax-creep came up to me once and asked me if one of my former employers knew who I was working for — the implication being they were looking for dirt on me. The stress of the job in the end made me quite ill.

The report of the Inquiry noted that there existed in IRD a "culture of fear and punishment." There are indeed some serious management problems within IRD. At the beginning of the Inquiry, the committee made a request under the Official Information Act. In a classic snow job IRD provided no fewer that 27,000 pages of information — enough to fill my office. It was from this pile that the infamous harpoon-through-the-heart cartoons came.

They made for interesting reading — perhaps most interesting was IRD's training manuals. They are a truly bizarre mixture. It seems that IRD have a full-time staff training program, which is a mixture of interrogation and new-age touchy feelyism. If Men are from Mars, women from Venus, then tax collectors are from Pluto.

New recruits are taught how to use their voice to gain superiority over taxpayers, how to pressure taxpayers, how to scare them and most interestingly they are taught to get the taxpayer to make some form of promise that they will pay up. One manual proudly proclaims "the tactics you will learn today are the same that the FBI uses to acquire confessions from criminals."

During the Inquiry, I interviewed some of the staff who deal with customer phone inquiries. It was obvious that IRD spend a lot of time training them, with the emphasis on teaching them to extract as much money as possible. They are trained to whenever possible get the taxpayer to admit that they are in the wrong, and to promise to make some form of payment, the logic being that if a taxpayer admits some mistake then IRD can blame any other mistake on them. Predictably they are told to never admit mistake on the part of IRD — "even when it's obvious it's our fault."

One of them made a startling admission: "I just love the power," she said "I mean I've got all the power, I get a real kick out of that. Sometimes you can hear the fear on the other end of the line. I put them on hold and let them sweat it out — they'll admit to anything after that, just to get you off their backs." Perversely they are given bonuses on how much they can get out of callers.

I have to say that most IRD employees are not megalomaniacs who get a kick out of putting 'customers' on hold, or who brag about how many of their customers commit suicide — after the restructuring most IRD employees are indeed the leperised geeks they portray in their $3 million ad campaign.

At more than one point in the Inquiry, IRD accused the Inquiry of attacking staff members and for lowering the morale of the staff. I find that rather rich. IRD management place enormous pressure on their staff to perform. But it goes further than that — the submission from the PSA (the union which represents IRD staff) was fascinating. They alleged that staff themselves were subject to the all-pervasive bullying culture — they informed the committee that staff had been warned against making submissions, and that they themselves were fearful.

In the end only one IRD employee, Michael Scott (a plaintiff in the Winebox), made a submission, although many staff gave anonymous written submissions. I got about 30 calls from staff who said that the Inquiry was on the right track, but were afraid to appear.

So where did this culture come from? Why do IRD never admit to any wrongdoing? Why do they offer bonuses to staff for convictions and increased penalties? Most importantly, what needs to be done now?

The answer can be found in the history of the IRD and tax in this country. When the Land and Income Tax Act was passed in 1891 by William Massey, establishing income tax and the department, it was hailed as a great social step. Only a small faction of the Parliament voted against it. Editorials at the time hailed it as "the beginning of New Zealand as a great nation in the world." One MP actually claimed that the introduction of tax would somehow raise the birthrate!

The department was given paltry powers compared to what it now has, the reason being it did not need to collect much tax. 87% of the Government's revenue came from customs duty and railway tickets. But the money was needed for new social schemes.

The Tax Act was not changed until 1913, when both the powers of IRD and the rate and amount of tax increased dramatically — this time the money was needed to fund the almost-bankrupt pension scheme, as well as a new raft of social schemes that the Government had promised.

This pattern has continued until today. For almost every rise in the tax rate there has been an accompanying increase in the powers of the IRD. And for every tax rise there has been a promise by the government.

It's a vicious self-perpetuating cycle which has seen government take more and more in taxes, to pay for more and more social programmes, collecting the needed money using more and more nasty tactics. New Zealanders have never voted in a government that promised to reduce taxation, and in fact no New Zealand government since 1891 has ever reduced the gross amount or ratio of government spending!

In a crazy way John Wright is absolutely correct; IRD find themselves under enormous pressure to provide the bounty for MPs to dish-out.

Before the election, the Government surplus was a razor-thin $13million — a few bad audits and the government would have been in the red.

In my experience with the Taxpayers' Union, there are many who actually believe that it is possible to maintain the tax rate and tax take, but to collect it more humanely (one guy even told me that he thought the tax-rate was too low, but that if the IRD was more human it would be able to collect more tax).

It is pure folly to suggest that it is possible to have a humane tax system as long as taxes are so high and getting higher. In historically typical form, the new government has promised all manner of things, and has only given cursory thought to how to pay for it all. IRD are faced with raising more and more, and will be forced to revert to even nastier tactics. It is impossible to separate the way that taxpayers are treated from the tax-rates themselves.

That is the reason the Committee were so unconcerned with the way that IRD trampled over the rights of taxpayers — they are addicted to the money that IRD provides.

In order for there to be change in the way the money is collected, there needs to be real change in the way that Government does business. For a start there needs to be a change from the dosomethingitis which successive governments have suffered.

The bureaucratic changes introduced under the fourth Labour Government 1984-90 were supposed to reduce waste, with their emphasis on "incomes", "outputs" and "outcomes." The result has instead been an open door to politicians playing to their audience, and promising the world — they have results in a plethora of vague goals with limitless budgets and open-ended lives.

Any changes to the manner that IRD collects tax, such as a reversal of the burden of proof will be futile unless there is a change in the way New Zealanders love politicians who promise them the Earth using taxpayers' money. Alas, with the way that New Zealanders have voted for the past 109 years this seems a pipe dream.

Since I left parliament I have helped set up the New Zealand Taxpayers' Union (NZTPU) — a group dedicated to lobbying for change in our tax system, and working as an advocate for harassed taxpayers. The most important thing that the NZTPU must do is to be an antidote for our politicians' terminal dosomethingitis.

When I am asked what the most important thing the New Zealand Taxpayers' Union must do I answer that we must change New Zealanders' attitudes towards tax-and-spend government; then and only then can we have no more Ian Muttons.

---

New Zealand Taxpayers' Union
PO Box 2850
Wellington.

---

If you enjoyed this, why not subscribe?