Over half a million people owe tax. How did this happen?
New Zealand's Inland Revenue is facing scrutiny as tax debt has ballooned to $9.4 billion, with small and medium businesses accounting for the majority of outstanding liabilities. Economists and accountants suggest that a more lenient approach during the pandemic may have contributed to the current insolvency crisis.
Why it matters
The accumulation of massive tax debt poses a systemic risk to the economy and raises questions about the sustainability of current business insolvency practices.
Inland Revenue needs to be asking questions about how billions of dollars in tax debt has been allowed to accumulate, one economist says.
As of March this year, more than half-a-million people had debt to Inland Revenue. Overall tax debt sat at $9.4 billion, of which Inland Revenue said 62 percent, or $5.9b, was collectable.
Total tax debt was less than $6b in 2023.
Micro and small-to-medium businesses were responsible for 65 percent of outstanding tax debt, and GST and employer deductions such as PAYE were 57 percent of overall debt.
The rate of tax debt increase has slowed to 1.6 percent a year by March this year, down from 27.1 percent a year in the year to March 2024.
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