Treating Labour like a taxpayer

Labour have said they will repay the $824,524 but not until 30 June 2007. Very nice of them to unilaterally decide their own repayment schedule.

Incidentially I think people should be extremely sceptical of their agreement to repay, until the money is in the bank. This is the same party which wrote to the Chief Electoral Officer before the election and said we will agree to include the cost of the pledge card in our election return. And then a few weeks later wrote again to say they had changed their minds.

Anyway if Labour were a taxpayer (instead of a taxstealer) and were owing money to the IRD, how much money would they have to be paying back?

First of all we start in Sep 2005 with a debt of $824,524. There’s an immediate penalty of 1% and a firther penalty of 4% seven days after it is due. Therefore $41,226.20 is added to the bill. Then a firther 1% penalty each and every month until June 2007. The total penalties come to $214,376.24.

Then we have use of money interest. The current rate is 13.08% and it is applied to both the principal and any penalties (but not to compunding interest itself). This sees around $10,000 a month average in interest which totals by 30 June 2007 the sum of $ $228,367.59.

So if Labour were subject to the same regime inflicted on taxpayers, their total debt would have gone from $824,524.00 to $1,267,267.83.

Now they may also get a penalty for the original error. The IRD scale is:

* Lack of reasonable care 20%
* Unacceptable tax position 20%
* Gross carelessness 40%
* Abusive tax position 100%
* Evasion 150%

One can debate where on the scale Labour would be. I’d go for gross carelessness myself.

And if one really struck the IRD Inspector on a day when they were grumpy, they could get hit with a further 25% for obstruction. You could argue the attacks on the Auditor-General by the PM constitute obstruction.