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Home / Rotorua Daily Post

IRD owed more than $7 million in tax by 46 Rotorua companies

Carmen Hall
By Carmen Hall
Rotorua Daily Post·
6 Nov, 2019 06:00 PM4 mins to read

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The Inland Revenue Department is owed millions by 46 Rotorua companies. Photo / Getty Images

The Inland Revenue Department is owed millions by 46 Rotorua companies. Photo / Getty Images

Paying tax can be painful. But it is especially important for businesses to keep track of what they owe and pay it. If they end up spending that money elsewhere the consequences can be dire like going bust or being forced into liquidation, Carmen Hall reports.
The Inland Revenue Department has
sought more than $7 million in owed taxes from 46 Rotorua companies in less than three years.

Experts say many are using the IRD as a bank and 70 to 80 per cent of businesses that went bust did so because of unpaid taxes.

Read more: Government introduces a tax incentive scheme for small business to encourage investment

Data obtained by the Rotorua Daily Post under the Official Information Act showed from 2017 to July 26, 2019, the IRD took 46 businesses to the Rotorua High Court to be placed into liquidation.

The companies jointly owed $9.02m but could not be named due to confidentiality and sensitive information reasons.

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IRD customer segment lead Richard Philp said in the 2017/18 financial year, the department collected $73 billion. He said 88 per cent of businesses made their tax payments on time while 81.5 per cent of the remaining debt was resolved in six months.

He said it was up to the commissioner whether to take action recovery against taxpayers and the department was given additional government funding in 2018 to collect unfiled returns.

Read more: Income tax base 'sensitive'

''We encourage customers to contact Inland Revenue as early as possible to discuss their options or get independent tax advice if they are unable to pay their tax.''

Tax Link director Allan Wells said often businesses which got into trouble were using the IRD as their bank, thinking they could trade their way through it.

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''But that is just a fool's paradise of because that doesn't happen.''

Burying their heads in the sand was a common scenario, he said, and human nature meant money was spent elsewhere.

Discover more

Written-off: IRD waives hundreds of millions of dollars in tax

01 Aug 09:00 PM

''One of the things I do know is about 70 to 80 per cent of businesses that do go bust do so because of tax and that it's a huge percentage. The original tax could be quite small but the penalties and interest can double or treble over a five year period and that is when it becomes crippling. A $30,000 bill is all of a sudden $100,000.''

He said unfortunately some people should not be in business.

Read more: Five members of one family guilty of $2.3 million

''In New Zealand, a lot of people really just buy themselves a job but they don't have the skills to or discipline to allow for the tax consequences.''

Wells said the IRD would often look at writing off the debt as sometimes there was nothing to be gained by going through the court process as the companies had no cash.

He suggested people new to business adopt a mentor.

Accredited Insolvency Practioner Kenneth Brown said often the IRD was an easy creditor not to pay.

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''For instance, if you don't pay one of your normal creditors by the end of the month they are on the phone saying 'where is our money?' Or they will say 'if you don't pay I won't supply you the goods'.

''The IRD don't generally do all that, they are not chasing them on a regular basis they will send them notices and letters, but it's not quite as threatening as somebody saying 'I will cut your supply'.

Read more: Payroll tax issues solved cheaply

''They tend not to pay the IRD and use that money elsewhere.''

Brown said the IRD would not usually take legal action against a company unless it was owed a considerable amount of money and once the court appointed a liquidator, they would takeover over the business and assets.

Rotorua Chamber of Commerce Bryce Heard said at times IRD could be difficult to contact and a caller may spend hours on the phone trying to speak to a person.

''So that does not help.''

But his advice to businesses was to get a good accountant.

''You need to get advice from a professional.''

Bryce said the chamber could refer businesses to experts.

Rotorua companies taken to Rotorua High Court
2017 - 15 companies
2018 - 19 companies
2019 at July 26 - 12 companies

Total owed by Rotorua companies
2017 - $2,261,118.54
2018 - $3,982,310.03
2019 - January 1 to date $2,776,702.66 - Source: Inland Revenue Department

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