Is it too easy to avoid tax obligations in Aotearoa New Zealand?

The Commissioner’s duty of care and management is established in the Tax Administration Act 1994 (TAA). As part of the duty of care and management, the Commissioner must “collect over time the highest net revenue that is practicable within the law”.2 This duty must have regard to available resources, the importance of promoting compliance, and compliance costs.3 In addition, “every Minister and every officer of any government agency … must at all times use their best endeavours to protect the integrity of the tax system”.4 “Integrity of the tax system” includes the “public perception of that integrity”5 as well as “the responsibilities of those administering the law to do so fairly, impartially, and according to law”.6 While responsible for collecting the highest net revenue practicable within the law, Inland Revenue (IR) may write off tax debt in several situations. These include bankruptcy,7 liquidation, when the taxpayer is suffering from serious hardship or when it is uneconomic to collect the debt.8 This article by Lisa Marriott, Professor of Taxation and Associate Dean (Research) at Te Herenga Waka Victoria University of Wellington, uses these criteria to ask: how easy is it to avoid tax obligations in Aotearoa New Zealand (NZ)? In 2019/20, IR wrote off $411.6 million in tax debt, slightly less than 2018/19 when it wrote off $532.6 million.9 While this is a small proportion of overall tax collected, it is a not insignificant proportion of total tax debt, ranging between 10% in 2019/20 and 20% in 2017/18 (over the 3-year time period examined in this study). This article commences with an outline of the data requested for this study. This is followed by a discussion of that data and the issues that it raises. The article then discusses 4 possible additional, or extensions to existing, debt collection mechanisms that could be used to assist with debt collection: Director Penalty Notices, greater investment in audit and investigation functions, a centralised debt collection office and the ability to name large tax debtors.