Geof Nightingale: Independent tax expert on New Zealand's black market

It’s been revealed that New Zealand’s hidden economy costs us around $13 billion a year in unseen taxes.

It comes out to around 11 percent of our GDP.

Independent tax expert Geof Nightingale talks to Mike Hosking about our black market.

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Episode Transcript

Speaker 1 (00:00):
It turns out black market, our black market is the
ninth smallest in the world. What does that actually mean?
This comes from the World Bank. It tells us the
hidden economy costs US around thirteen billions a year in
unseen taxes, which is about eleven or twelve percent of
our GDP independent tax ex But jeff Nightingale back with us, Jeffrey,
good morning, Good morning mate. It's a big number, but
not a bad number. What do we make of it

(00:21):
is about what you thought it might be. Does anyone
have a clue?

Speaker 2 (00:25):
No, we don't really test it in New Zealand, so
that the World Bank modeling is about as best as
good as we can get. But I'd be surprised if
it was that big. I think it's significant, but you know,
we've got a pretty good tax system. Most taxes collected
at source when we pay wages and when we pay
interest and dividends, so there is definitely a cash for

(00:46):
a black economy. But I'd be surprised was quite as
big as as the World Bank is predicted.

Speaker 1 (00:51):
And this takes in gangs as well as people going
just fix that for me and I'll give you fifty
bucks cash.

Speaker 2 (00:56):
Yeah, there's three issues. There's the cases that we all
know there is organized crime and the process of crime,
which are run as sort of business enterprises and outside
the system. And then the third issue are sort of
under reported income, so income that doesn't get reported by
someone that's in the system, or expenses that are overclaimed,
and those three things add up to the tax gap

(01:19):
if you.

Speaker 1 (01:19):
Like that last one. The IID seemed to be moving
on these numbers over the last couple of days about
people involved in investment, property and developers and stuff like that.
So something's happened with an IID and they're working a
little bit harder than they have. Is that fair?

Speaker 2 (01:33):
That's absolutely true. So two things have happened. One is
POST a very kind of relaxed approach to get us
through COVID inland Revenue have tightened enforcement and so they're
doing projects in construction, hospitality, property. And the second thing
that's happened is they both have the technology now and
the funding to go after large data sets. So they

(01:55):
are matching up almost everything we do these days is
electronic and they are matching up those data sets tax returns,
and they're collecting, you know, reasonly significant amounts of revenue
from that?

Speaker 1 (02:04):
Are we doing about as good as we can? There's
always going to be a black economy, isn't there?

Speaker 2 (02:09):
There is? There is. I think we're doing about as
good as we can. I think, you know, there's always
room to do a bit more. And the point about
a collecting is not so much to get more tax
into and make government bigger. It's about keeping the tax
rates on those people in the system as low as possible. Yeah.

Speaker 1 (02:27):
Interesting, all right, mate, appreciate your expertise as always Jeff Nightingale,
independent tax ex But for what it's worth, the top
twenty ish, as far as I can work out, are
all within a margin. The best in the world appears
to be at seven point nine percent of GDP Switzerland.
The States is second. Maybe that's a surprise to you
given their reliance on cash. China at eight do we
believe that? Japan at ten point two? We come in,

(02:50):
as I say, at ninth eleven point two. We're just
ahead of the UK at eleven point seven, Australia at
twelve point six. There is dodgy as but we knew that.
Ireland thirteen point two, and you go out to somewhere
like Saudi Arabia at fourteen point seven, but none of
them are you know seventy percent. For more from the
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