Tax Debt Surge: IRD's Action Plan Unveiled
and what you can do to get ahead of your tax debt.
🥜 In a nutshell:
Overdue tax debt is rising as businesses struggle post-pandemic, but we’re here to help.
Economic challenges and fading Covid support have left many businesses with mounting tax obligations.
IR is focusing more on debt recovery and compliance, using data to enhance enforcement.
We’re on your side—reach out and let’s tackle this together.
Hey there, Kiwi businesses! We get it—times are tough right now with the post-pandemic recession hitting hard. One thing we've noticed is that overdue tax debt is climbing, and we're here to help you navigate through it.
The combination of the pandemic's aftermath and current economic struggles means many businesses are finding it tough to keep up with their tax bills.
Inland Revenue (IR) recently shared some eye-opening stats that show just how big this issue is getting. Individual income tax debt jumped from $1.1 billion in December 2022 to $1.4 billion in December 2023. Non-individual income tax debt rose from $513.6 million to $629.0 million, and GST debt soared from $1.9 billion to $2.5 billion over the same period. Employer debt also saw a big increase, going from $838.6 million to $1.2 billion.
Several factors are at play here. In 2022, businesses got a lot of support from Covid relief, low interest rates, and strong consumer demand. But now, those good times are fading. Interest rates are high, consumer confidence is low, and many businesses are running on empty after the long lockdowns. It's no wonder tax debts are piling up, as businesses prioritize paying employees and suppliers just to keep going.
In response to this, IR has shifted gears. They’re moving from pandemic relief to focusing more on getting overdue taxes sorted out. This means they're stepping up their compliance and enforcement efforts.
IR is also keen to make sure everyone pays their fair share of tax, especially now. They’re using more data and info from various sources, like payment service providers, to improve their review and audit processes. By leveraging data analytics, they aim to be more effective in their enforcement measures.
But here's the good news—IR wants to work with you. They've got a plan to help manage overdue debts and are urging businesses with outstanding tax to get in touch early. Setting up an installment arrangement can lead to better outcomes. We can take steps - installment arrangements, lump sum agreements, write-offs, etc. But the most important thing is to get in touch with the IRD!
In the coming months, IR will be reaching out to businesses with significant tax debts, especially those who haven’t responded to reminders and warnings. They've got options to help those struggling, but they need you to talk to them so they can understand your situation and find a way forward together.
If businesses continue to ignore their tax obligations, IR may have to take stronger actions, which could include debt enforcement or insolvency proceedings. But let’s avoid that—reach out and let's tackle this together. We're on your side, ready to support you through these challenging times.