New Zealand Losing $9.4 Billion Every Year to Fraud

New Zealand is losing $9.4 billion a year to economic crime. According to a draft report by the Serious Fraud Office, government ministers had been working on the cost of economic crime for two years. The report was expected to be presented before the Cabinet. A copy of the report was obtained by Radio New Zealand under the Official Information Act but was never released.

The news agency also acquired a copy of the estimated costs of the different types of economic crime ranging between $6.1 and 9.4 billion. According to the report, the amount was more than twice the combined annual budgets of the police department, the courts and the Department of Corrections. The cost of economic crime was also more than the total net profit of the top 30 financial institutions and top 200 companies in New Zealand.

The report revealed that the country loses $2 billion a year to tax fraud with 5 percent of the amount being detected. In contrast to the government report, international organisation Tax Justice Network estimates tax evasion in New Zealand reaching $7 billion a year. The New Zealand report has estimated the country’s fraud to be equivalent to 3.9 percent of gross domestic product.

Michael Woodhouse, the minister in charge of the Senior Fraud Office, said he was advised that the methodology used in calculating the figures had problems in respect to measurements from another market. In a statement, SFO said the original methodology was developed overseas and was therefore declared not applicable to New Zealand.

As a result of the problematic methodology, the report was not finalised. SFO said it has no plans to continue working on the report. SFO’s 2012-2015 Statement of Intent indicated that its report would play a “critical role” to reduce financial crime in the country.

Meanwhile, New Zealand’s economy is boosted by the service sector as it rose 0.3 of a point to 58 percent in September. Despite the losses in economic crime, the service sector is keeping the economy up as it accounts for two-thirds of the country’s income. Reports said Bank of New Zealand economist Craig Ebert said the report affirms positive expectations in the country’s service sector