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Anthony Willy

Taxing Gangs

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Like the biblical poor criminal gangs have throughout history, always been with us – think Robin Hood. That said as organised criminal enterprises they appeared only relatively  recently in New Zealand society. Within the memory of most readers, it was the “Mongrel Mob” who first captured public attention assisted by Sir Robert Muldoon who appeared to have some sympathy if not affinity for their predicament, which to be fair is a history of child neglect and lack of education. The name itself has an interesting provenance. A grumpy Magistrate sitting in the Napier in the 1960s was regularly plagued with antisocial young, mostly Maori offenders, who constantly found themselves in all sorts of trouble. So cross did he become that in open Court one day he told them that they were “nothing but a pack of mongrels.” That became a badge of honour which they have retained to this day and continues to mark them out to the public as outcasts. I recall many years later confronted for the umpteenth time with some of their number in the dock, suggesting to their counsel that they might consider changing their name as a means of improving their public image and assisting their integration into society. The suggestion was adopted with alacrity, and they adopted a new name comprising two Maori words (I forget what they were, and nobody enlightened me so there it rested). It soon became apparent to my disappointment that the name change had done little to reduce the amount of offending. It was some months before I learned from an amused probation officer that in English the new name meant “mad dogs.” So much for a soppy liberal approach to the problem.

With the passage of time and the influx of Australian/New Zealand criminals into New Zealand the problem has become more and more serious and widespread, culminating in gang warfare sparking the recent events in Opotiki whereby they now not only consider themselves above the law, but are able to intimidate the police and close down a town for as long as suits them. The business of gangs has also changed. Whereas previously they were petty criminals stealing, burgling, dealing in stolen property, trading some drugs and fighting each other, they have more recently polished their image. Apart from such incidents as Opotiki many people would probably say that if there is a gang in their community, they are either not aware of them or they do not cause much trouble. Indeed, I have heard of an instance of a gang member assuring a young mother out walking her baby that she had nothing to fear from the nearby Mongrel Mob compound as they would see she was safe.

The reason for this transformation is not hard to find – they have become business enterprises, and the business is the marketing of hard drugs for which there is no shortage of buyers. In fact it is sickening to listen to some of the more affluent members of society tut tutting about events in Opotiki when they either take hard drugs themselves or know and remain friendly with people who do. Viewed in this way the gangs are simply entrepreneurs, now on an international scale, meeting the market of those who can afford to pay the extraordinary prices which the trade now commands.  Poor people are not among their clients. The proceeds of this trade are massive and enable the providers to live as they would wish and enjoy all of the trappings of success: large stashes of cash, overseas travel, business premises, more upmarket uniforms and most conspicuous the motor vehicles they own: top of the line Harley Davidsons and Range Rovers among them. Of course, these vehicle fleets are a necessary part of any successful business being able to travel to meet the market wherever it exists. A Mongrel Mob member on a selling trip was recently killed on his motor bike travelling north to meet the interisland ferry. When police arrived at the scene, they found the roadway littered with packets of hard drugs.

All of this trading in drugs is of course illegal and if on the rare occasion the police can establish a link between the offending and the money made then they can, pursuant to the Proceeds of Crime legislation of 2009 forfeit any property known to be used in the commission of the particular criminal activity. The standard of proof linking the proceeds of the crimes with the property is the civil standard of proof – upon the balance of probabilities – that is it is more probable than not that the property found in the possession of the gang is funded by the proceeds of crime. Seizures are however surprisingly rare given that in the case of the gangs there is only a miniscule chance that the property which they possess was derived from some  lawful activity. In the result the gangs are able to continue trading on an ever more lucrative scale, and of course with prosperity comes increasing arrogance and more blatant disregard for the law. This in turn attracts ever more recruits both male and female (the females make very good “mules”) and we see the result in the disparity between police numbers and those of the mobsters on the streets of Opotiki. As things stand and so long as there is such an affluent  market for the product the problem will only get worse, and clearly traditional policing methods are not succeeding. There is however another process which can be used in parallel with the police seizures and relying on the police for the necessary protection. It lies in the application of the Income Tax Act.

The current Income tax legislation was amended in 2007 making it clear that any property arising from the conduct of a business activity carried on with a view to profit is amenable to income tax, and the Act is clear that a criminal enterprise is within that definition. The Act covers not only money but also any property such as motor vehicles  necessary to, and used in the business. It is for the person to explain to the Commissioner how the money or property was acquired; there is no onus on the Commissioner to prove anything other than it exists and is found in the possession of the party concerned. In those circumstances the Commissioner then applies an assets accretion exercise and arrives at an amount of undeclared income that would have been necessary to purchase such items. In this way he calculates the amount of income tax evaded, adds penalties, which can amount to three times the tax, and levies the enterprise accordingly. If the “taxpayer” does not have untainted money available from which to pay the tax, then the property is forfeited to the Crown. He is also able to bring criminal proceedings against the defaulter which can result in imprisonment and or a fine.

There will be those who say that suppressing crime is the exclusive business of the police, but organised crime continues to flourish under the present policing regime. We would do well to remember that it was not the FBI who brought down Al Capone, America’s crime Czar but the Inland Revenue Service who secured convictions for tax evasion on a massive scale resulting in his imprisonment for a lengthy period and permanent damage to his criminal family. There are also no doubt, those who would say that such an approach is beyond the ability of the Inland Revenue Department to mount such an initiative. It is not however beyond the power of a government which is serious about tackling the gang problem to establish a dedicated unit in the Tax office (or the Police) comprising senior tax inspectors supported by the necessary police resources to ensure the personal safety of the officers concerned and backed by all of the modern surveillance methods available. But sad to say there is the sneaking suspicion in the police hierarchy and the present government that allowing the gangs to continue largely unmolested is safer than depriving them of their principal source of drug generated income thereby forcing them to turn to more violent and traditional criminal methods of earning a living. That may be true in the short term but such an attitude smacks of gang blackmail and cannot be allowed to dictate policy. Crime wherever it arises must feel the full force of the law. The National Party election proposal of introducing harsher sentences is window dressing of the tough on crime variety but unlikely to make much difference to the survival of drug dealing gangs. Sentencing is the province of the Courts and the sentences imposed have regard to all of the relevant circumstances of which the maximum penalty is but one.

Of course, all of this is deeply unpalatable to the present government. It appears to favour gang membership by emptying out the prisons and even under the auspices of our late unlamented leader funding the Mongrel Mob to the tune of some three million dollars of taxpayers’ money. Touted at the time as intended to assist the members in reforming themselves and to encourage them to turn to lawful pursuits but plain to anybody with half a brain as a pointless waste of money, if not deeply suspicious. But then she did support the legalisation of cannabis knowing that it has been a social disaster in those American states which took the same course.

Use of the income tax procedures on a regular basis would not only make it hazardous for the gangs to continue trading but the loss of their status toys and any other property used in the enterprise would render their activities pointless. It would also make it more difficult for them to survive as a gang and this would stem the flow of new recruits. Gang prospects would be better to get a job or perhaps emigrate to Columbia to advise and assist the drug cartels there. This method of dealing with these growing criminal enterprises has the added benefit of leaving room in the prisons for the more deserving and cutting off the supply of hard drugs at source. It would also enable Customs and the police to focus on the growing use of New Zealand as a transit point in the international drug trade.