Revenue Minister Simon Watts announced that Inland Revenue is receiving an extra $35 million a year in the Budget to improve tax collection after tax debts ballooned to $8.5 billion. Photo / Alex Burton
Revenue Minister Simon Watts announced that Inland Revenue is receiving an extra $35 million a year in the Budget to improve tax collection after tax debts ballooned to $8.5 billion. Photo / Alex Burton
Inland Revenue investigators have been allocated an extra $35 million annually to tackle New Zealand’s ballooning multibillion-dollar tax debt mountain.
Revenue Minister Simon Watts made the announcement as part of the Government’s 2025 Budget releases this afternoon, and said the extra funding was tagged for tax compliance and collection activities.
“At a time when the Government is carefully managing every dollar to fund the essential frontline services Kiwis rely on, it’s essential we crack down on those who are not paying their share of tax,” Watts said.
The 2022 Budget had also provided the Inland Revenue Department (IRD) with an additional $27m annually to ramp up compliance activity. Watts said this earlier increase had been sustained and today’s $35m annual increase represents an additional boost to the tax department‘s recovery efforts.
The IRD push for compliance comes after tax debts have more than doubled over the past four years following a recession and a period during the Covid crisis years where it had been directed to be lenient with those struggling financially.
In December 2020 overdue tax payments – including child support, student loans and Covid-19 support loans – stood at $4 billion.
According to Watts’ press release accompanying his Budget announcement, the figure for December 2024 stood at $8.5b.
“Every dollar we recover is another dollar we can devote to funding schools, hospitals, and law and order. Investment in tax compliance delivers real results for Kiwis,” Watts said.
Independent tax adviser Geof Nightingale, formerly of PwC, was broadly supportive of today’s move and said returns from spending on tax compliance were considerable.
He said Watts’ claim that each dollar spent would generate $8 in increased tax take, with half coming in the first year, likely underestimated the effects.
He said such activity by IRD led other taxpayers, even if not directly targeted, to improve compliance as they became aware of the consequences of, and monitoring for, tax underpayments.
“It’s got a halo effect. There’s no way of measuring it, but it is true. I’ve seen it myself: once IRD starts paying attention to a sector, everyone in it takes notice,” Nightingale said.
“It is positive that IRD does more compliance. It improves fairness of the tax system.”
Nightingale said he was not in a position to judge whether $35m more annually was ideal, and said a law of diminishing returns would put a limit on the efficacy of spending on compliance.
Matt Nippert is an Auckland-based investigations reporter covering white-collar and transnational crimes and the intersection of politics and business. He has won more than a dozen awards for his journalism – including twice being named Reporter of the Year – and joined the Herald in 2014 after having spent the decade prior reporting from business newspapers and national magazines.
