ONE MAN'S FIGHT AGAINST THE INLAND REVENUE

by Richard Cawte -- (From 'Q' Newsletter, Q6.3)

Golden Rule of Freedom No. 2: Own as little as possible.

What? What does that Cawte chap mean by saying we should own as little as possible? Is he crazy? All our lives we are told to get the skills that will get us jobs that will get us power to buy things. Now you're telling us to own as little as possible?

Actually, my advice would be for you to "own" NOTHING AT ALL - if it were possible!

Why? For the simple reason that what you do not "own" can not be taken away from you. Have access to use all the things that you want to use - but think twice before you "own" them?

We live in a strange world where sensible conversation about a problem is rarely employed if litigation is an alternative. Litigate! Litigate! Litigate! Seems to be the cry of our time. And of course, the lawyers rub their hands with glee. (And fill their wallets).

There was a recent case of a lady in England who collected porcelain pigs and put them in her bay window. She was sued by a Muslim gentleman who found this offensive. Fair enough to find it offensive - but why not go and talk to the lady concerned instead of jumping in there with his litigatory boots on? He won, of course.

Then there was the case of the unmarried couple in USA who were looking for a flat to rent. When they arrived at one particular flat, the old lady who was renting out the property said that she was terribly sorry, but she could not rent the flat to them because they were not married, and it was her policy to rent only to married couples. So what do the couple do? Go and find another flat of course - Not a bit of it! They sue the old lady in question for discrimination, win, and then move in to the flat.

Now, call me a reactionary, but this sort of behaviour is, to me DYSFUNCTIONAL. It smacks of the "I'm alright Jack" attitudes that have been increasing in the last two decades. Rational debate is ignored for the sake of a quick buck.

But whether or not you agree with my sentiment, the fact is that whatever you own can become a target for predatory individuals, whoever they may be. If you ignore that, it is at your peril. So, you have two choices - you can protect your assets by diversifying and structuring your affairs or you can bury your head in the sand and hope that nothing will happen to rock your boat!

If you think it can't happen to you, then try reading Dave Henderson's book "Be very Afraid - One man's stand against the IRD". This book should be read by anyone who has ever paid tax to any revenue department. It is an amazing tale - and I only wish it were extra-ordinary. Unfortunately, it is now a common occurrence.

Dave Henderson's Story.

Dave Henderson was, and still is, a New Zealand citizen. New Zealand, that place renowned for it's civilised approach to life - where people are more English than the English are, where there are more sheep than people (at least more that can be distinguished as such!) and where there are some good wines, excellent trout fishing and good skiing to be had too.

Well, Dave's story paints a different picture.

A successful businessman, Dave had been an entrepreneur all his life. He's one of those people who just loves starting up enterprises and getting new ideas off the ground. He had been successful for 15 years or so, building up many different businesses. He always paid his taxes, filled in the right forms, and lived life as a regular, if dynamic, citizen of his country.

Then, in 1994, he lodged a request for a rebate on some GST (Goods and Services tax - the NZ equivalent of Value Added Tax in the UK) for NZ$60,000 (around £20k or US $30k). Not a small amount to anyone, but especially someone who has many businesses on the go, some of which are more successful than others, and all of which depend on cash-flow. His claim was entirely legitimate.

He sent his female secretary to lodge the form with the IRD (Inland Revenue Department). Straight away they showed their true colours. She was asked whether or not she was sleeping with Henderson. She was told that walking in wearing a short skirt and a big smile might work on some people, but not on the IRD. She was sent back upset and confused. Yet, that was to prove only the very tip of a large and dangerous iceberg.

It is now five years since Henderson first made his claim. He has been forced to close down each of his businesses. He has had to declare himself bankrupt. He has been subject of a fraud investigation by the police. He has had years of desperate struggle to prove his innocence and to claim the money rightfully owed to him by the government. His health and his personal life have been turned upside down. But he is still positive, rational and emphatic in his defiance. He knows the IRD are guilty of many misdemeanors, and he's determined to do something about it.

In January of last year, Henderson finally received his check for NZ $65k (including interest calculated at 8.5%), but at the cost of losing everything in the process, plus an estimated three times that in hard cash expenses alone.

It seems the IRD were guilty of the following:

1. Gross misconduct to Henderson's secretary.
2. Lying deliberately to the police about Henderson, so that a claim of fraud was made against him.
3. Wasting more than $1.5 million trying not to pay the 60k they owed him.
4. Lying to the courts about the state of the audit they were running on one of his companies.
5. Lying to members of parliament. Successive ministers of finance (there have been four since Henderson took up the case) have been misinformed by the IRD as to the exact nature of Henderson's case.
6. Taking money directly out of Henderson's bank accounts, to the extent that he closed all his personal and business accounts in New Zealand. When he was eventually paid his rebate (four years late), he demanded to have it paid to cash, got on an aeroplane and flew to the Bahamas, where he banked the cheque safe from the avaricious claws that had cleaned his domestic accounts.

In short, if it had not been for Dave Henderson's tenacity, his ability to tape many hours of conversations he had with various members of the IRD, so that he could throw their actual words back at them, and his willingness to fight on a principle, the IRD would have squashed yet another person in their desire not to see justice done, but to see their pockets filled.

It is a disgraceful tale of shambolic disorganisation and deliberate malpractice. Thankfully, Henderson managed to gain the support of ACT MP Rodney Hide, who makes a passionate plea for change in his introduction to the book. As Henderson says, without Hide's help he almost certainly would not have won anything in all this time. What a sad indictment of the bureaucratic bunglers who are some of the most powerful people in the world. What a colossal statement in favour of my Golden Rule number 2 - Own as little as possible.

One thing I can advise everyone to do - be preventative, not curative. If you have the chance to structure your affairs at the outset, then do so. Once you have a business structure in place, it will be mighty hard to convincingly change that structure without an accusation of tax evasion being levelled at you. And we can all do without that!

So, check out the different options that you may have to set up a new business. Talk to experts like Robert Hudson and Eesh Aggarwal. Read as much as you can about offshore jurisdictions, and about new methods of legally mitigating your tax bill. But, please make sure you do everything within the law of the jurisdiction in which you are domiciled. That is crucial.

As a first step, read Dave Henderson's book - Be Very Afraid - One man's stand against the IRD published by ALISTER TAYLOR IRD PRESS Ltd. You can order it direct from us by sending a cheque/postal order made out to Quester Press for £25/US$43. Price includes airmail delivery anywhere in the world.

Here's what Graham Holland, the IRD Commissioner, said:

"No employee of any kind of business, including the professional, competent and hardworking staff of Inland Revenue, should have to put up with the type of nasty and vicious personal attacks which have occurred in this book.

"We continue to have confidence in the professionalism, competence and integrity of the staff of the Inland revenue Department."

Here's what Rodney Hide, ACT MP, said:

"You should read this book. You could be the next. Our Inland Revenue Department is out of control. No one in authority cares or wants to do anything about it. Their only concern is that the money keeps rolling in and that the stories stay out of the papers.

"Our politicians and bureaucrats now view businessmen as villains, crooks as victims, and lazy losers as heroes. Our government's values are anti-capitalist and anti-enterprise. The values of our politicians and our civil service must be changed radically if New Zealand is to succeed as a productive and free nation.

"We need more people standing up and telling our politicians and bureaucrats that they have had enough."

Here's what I say: I have met Dave Henderson. He is not a liar or a cheat. He's one of the good guys. Quester Press is not taking any commission from the sale of his book, because we know that Dave has been run through the mill by the IRD. I'd like everyone to read his book, so that the knowledge of what a government department is capable of gets out there. It's an amazing read.

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