Editorial: Chasing debt only fair to taxpayers

An estimated $3.1 billion is owed by about 110,000 Kiwis with student loans living overseas, many of them in Australia. Photo / Getty Images

Editorial

New Zealanders often appear unable or even unwilling to repay their debts, especially those owed to the state or city hall.

At the lower end of the scale, drivers evading tolls on the Northern Gateway cost the New Zealand Transport Agency close to $500,000 every six months.

Five years of records from Auckland Transport, the super city agency which collects parking and vehicle fines, showed while it pulled in $100 million from motorists, it had unpaid fines of $24.4 million.

Child support debts and unpaid student loans sit at the top end of unmet obligations. Much of the child support debt stems from penalties added to unpaid bills.

Last year, the Government decided to ease up on the penalty component, recognising that much of it was owned by individuals unable and unlikely to ever repay a cent.

By its calculations, Inland Revenue expects to write off $1.7 billion over four years by using a "fair and reasonable" test to extend penalty relief where it makes sense to do so.

Revenue Minister Todd McClay said the changes were designed to get parents to start paying so children were better off.

The less punitive system starts from April 1, though Mr McClay warned persistent non-payers could be nabbed at the border.

The reform makes sense, given it ought to benefit more children sorely in need of support.

The amount students owe is also starting to pile up. An estimated $3.1 billion is owed by about 110,000 Kiwis with student loans living overseas, many of them in Australia. Those based overseas make up 15 per cent of all borrowers, but 74 per cent of those with overdue payments and 90 per cent of the overdue amount.

So the student debt problem is largely an offshore one, and the solutions proposed to deal with it largely reflect this long reach. The main exception is the border arrest option, which was exercised with considerable publicity last week.

The message sent by the dramatic airport detention was doubtless what the tax department wanted. Its phone lines were busy on Friday from alarmed student loan defaulters worried that they too might be asked to step aside from the departure queue.

The New Zealand Union of Students' Associations suggested the hardline policy would turn the offshore graduates into permanent refugees and create anxiety for parents alarmed they would never see their children on special family occasions.

This seems unlikely. In any event, there is a straightforward solution. The overseas defaulters should get in touch with IRD, and start the repayment process.

There will soon be an extra incentive for the thousands of tardy borrowers when Australia gets the contact details of New Zealand defaulters living across the ditch.

Debt owed to taxpayers or ratepayers is no different than debt owed to a bank for a mortgage or business loan. Shareholders of a bank would expect it to pursue unwilling debtors, just as taxpayers expect public agencies to chase those who welsh on their obligations.

The taxpayer should not be an easy touch. This is not a harsh or unjust position, simply a fair and realistic one.