Unpaid PAYE and KiwiSaver payments have nearly doubled in the past five years, and levels of overdue GST have nearly tripled over the period, Inland Revenue figures show.
A Weekend Herald analysis of Inland Revenue's annual reports shows debts related to overdue PAYE and KiwiSaver payments rose from $336.2 million in 2017 to stand at $919.6m last year. Meanwhile over the same period outstanding GST debt surged to $1.5 billion from $825.6m.
While the Covid crisis is responsible for a decent proportion of the increase - with business tax debt writeoffs doubling to $813m between 2020 and 2021 - in recent years business-related tax debts have consistently been growing faster than overall tax collection.
National Party MP Andrew Bayly, the Opposition's revenue spokesman, called the surge in overdue taxes "quite significant" and said it showed both problems with Inland Revenue's management of overdue taxpayers and stresses in the wider economy.
"The economy is multifaceted. Some businesses have done really well, some have done okay. But there is now, as a result of Covid, a large rump that has really struggled for cash," he said.
Bayly said discussions with the sector had raised concerns Inland Revenue was over-reliant on its new, largely automated, IT computer system for managing taxes developed as part of its billion-dollar multi-year Business Transformation Program (BTP).
"Now, with the BTP, there's probably an over-reliance on waiting for the system to churn out information and letters to people. And there's probably not enough personal intervention: Sometimes you just need to pick up the phone."
In March Inland Revenue had stressed overall debt levels were holding steady, but a Weekend Herald analysis of tax figures shows the marked increase in overdue taxes related to business activities was largely being masked by a long-term decline in debt related to child support payments.
Legislative changes in 2015 allowed Inland Revenue more leeway in managing child support debt, seeing the total owed decline from $2.7b in 2017 to last year stand at $1.4b. In 2021 alone, nearly a billion dollars of child support debt was written off.
Contacted for comment this week Inland Revenue declined to make anyone available for interview. In a written statement, attributed to customer segment leader Richard Philp, the tax authority cited the effect of Covid in explaining much of the increase.
"When overlayed with Covid interruptions that businesses experienced, these increases in debt are not surprising," he said.
"We make no apology for Inland Revenue's focus in recent times which has primarily been about supporting Covid-affected businesses."
Philps said 72 per cent of the $370m increase in unpaid GST in the year to June 2020 had accrued in the three months after the level 4 lockdown began in late March, and much of this came from many struggling businesses which were receiving government assistance like wage subsidies.
"It would have been illogical and counter-productive for IR to be troubling such businesses for outstanding tax payments at that time rather than supporting them to get into an appropriate payment arrangement for core debts," Philps said.
Philps said instalment arrangements were in place for much of the overdue debt, with Covid-related legislation allowing an additional $117m in penalties and interest payments to be written off.
Libertarian commentator and liquidator Damien Grant, of Waterstone Insolvency, was sharply critical of Inland Revenue and said the debt blowout - allied with a precipitous decline in liquidation action by the taxman reported by the Weekend Herald in March - posed a risk to the integrity of the tax system.
"Given how squishy the IRD has been at enforcement in recent years, tax is no longer theft; it is a voluntary contribution relying on the moral pressure of a collection plate as handed around at church," he said.
Philp said Inland Revenue was now changing tack and assessing the viability of businesses with overdue taxes.
"Inland Revenue is ramping up efforts to engage businesses that have outstanding tax debts," he said.
"If it is clear that a business is no longer viable, we will take appropriate action to address current and future debt through the legal processes available to us."