Have you ever wondered what happens if you don’t pay your taxes on time? You don’t have to look far in the media these days to find articles on the level of tax debt and what Inland Revenue is doing about it.
Andrea Scatchard
Since COVID 19 the level of tax debt has more than doubled from $4.3m in June 2020 to $9.3m in March 2025. The initial rise in debt levels can be attributed to Inland Revenue’s be kind approach during COVID when outstanding debt was allowed to build up and was only lightly policed, and is compounded by the current economic climate.
Over half of the debt is GST and PAYE debt. These amounts are actually tax that has been collected by businesses on behalf of the Government and employees, and Inland Revenue takes a particularly dim view of taxpayers that don’t pay these taxes on time.
So what is Inland Revenue doing about this? Well if you have outstanding tax debt, you can expect the personal touch. Since early October, compliance officers have been calling taxpayers with more than $1,000 of tax debt which is at least 6 months old. If they cannot get hold of you by phone, you should expect an in person visit to encourage you to pay up or set up a payment instalment arrangement. You could also be contacted by Baycorp, who started a pilot programme with Inland Revenue earlier this year to increase the odds of making contact with defaulting taxpayers.
Inland Revenue tax
If these actions still don’t get the tax paid, there are other avenues available to Inland Revenue. They have the power to request deductions from the bank accounts of taxpayers, and have been using this effectively. Since June this year, more than 16,000 deduction notices have been issued, which is 25% more than in the whole of the year before, and more than $17m has been collected this way. The amounts deducted can be quite high and could have a real impact on someone’s cashflow which reinforces the need to engage early with Inland Revenue if you find yourself behind on paying your tax debt.
As a last resort, Inland Revenue does not shy away from liquidating companies if it is unable to recover the debt. The year to June 2025 saw 1,701 liquidations instigated by Inland Revenue, a 31% increase from the year before. While in many cases the tax is unlikely to be recovered in a liquidation, even where tax debt ranks higher than other creditors, forcing liquidation will stop the debt from increasing both for all creditors.
So the moral of the story is that if you don’t pay your taxes in time and let things get out of hand, you will be in line for some unwanted attention from Inland Revenue. Your accountant can help you navigate the process with Inland Revenue to give the best possible outcome.
