If the Government wants to reduce the prison muster it can start by taking a look at sentences in tax cases, says Damien Grant.

OPINION: It's hard to have sympathy for John Clancy. He ran a building firm in Christchurch until things began to unravel around 2015. His businesses failed leaving debts to various creditors, including more than $2 million to the IRD. He signed himself into bankruptcy the following year.

His fall from grace was not complete. Last week he was sentenced to 14 months in prison for failing to make GST and PAYE payments to the tax department. David Udy, the IRD's group manager collections, was pleased with the result and stated: "It appears he thought it was fine to deprive New Zealanders of money that funds the public services everyone benefits from…"

But despite his conviction, Clancy is not a criminal and the incarceration of tax defaulters is an immoral act by a state blinded by hubris.

DAVID WHITE/STUFF Damien Grant believes the IRD's heavyhanded approach discourages entrepreneurs.

Business is hard. The pressure to pay wages, maintain cashflow and hide the true state of the overdraft from your spouse leads many entrepreneurs to anxiety and stress.

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Yet these good people drive employment, create wealth and provide the goods and services everyone benefits from. A successful economy creates an environment for business people to enter the market and provide an escape if things go wrong. If we make the price of failure too high many will be deterred from engaging in commerce.

We abolished debtor prisons in favour of the bankruptcy regime; a three-year hiatus where those who failed could be shielded from their creditors yet removed from the world of commerce.

Thousands of companies fail every year. A small number of them pass through my office. Very few are bad people. Almost every one has failed to pay GST and PAYE.

The IRD maintains a fiction that PAYE is trust money, yet this is contrary to the form and custom of modern business practice. Every time a firm pays their staff a debt obligation is created to pay PAYE. Failing to pay PAYE when the debt is due is not theft, it is a struggling business owner deciding to pay the rent before they pay the IRD. People who make this choice are not criminals. They are debtors.

No other creditor can imprison those who don't pay their bills, yet alone in the commercial sphere the IRD retains the power to incarcerate defaulters. It seems that this new Government is keen to reduce the prison muster. Releasing Clancy and his comrades would be a good place to start.