IRD in talks with foreign tax departments for student loans

The Inland Revenue Department is stepping up recovery efforts overseas. Photo / File

Inland Revenue says it's in talks with foreign tax departments including the UK's HM Revenue & Customs as it steps up efforts to recover money owed by overseas-based student loan borrowers.

Kiwis living overseas accounted for more than 90 per cent of the $1.07 billion in overdue repayments to the Student Loan Scheme as at June 30. Some $15.34b is owed under the scheme by 731,754 borrowers, of which overseas borrowers owe 21 per cent, or $3.24b by 110,739.

Earlier this month, IRD said an information exchange agreement with the Australian Tax Office (ATO) had identified 10,400 student loan borrowers living across the Tasman, and it would contact them about repaying their loans. At the finance and expenditure select committee this morning, National MP Chris Bishop asked whether that debt collection could be extended to other similar jurisdictions like the UK or Canada.

"We are already working with some of those parties and indeed have debt collection agencies working in those countries," commissioner and chief executive Naomi Ferguson said.

Deputy commissioner Arlene White told the committee the department was talking to the UK's HMCR "right now, and we're looking at a bilateral that we could engage with them and share data with them."

Ngatokotoru Puna, 40, the nephew of Cook Islands Prime Minister Henry Puna and first person to be arrested for student loan default. Photo / Michael Craig

"It's always a matter of them wanting to share with us," she said. "Around 65 per cent of overseas-based borrowers are in Australia so we do think we're getting the majority of them, but other jurisdictions are also part of our planning."

In 2014, the government amended the Student Loan Scheme Act to allow for the border arrest of borrowers in default on their loan repayments. The first arrest under this amendment was made in January this year, with two further arrests since.

Ferguson said there had been a 17 per cent increase in loan repayments from overseas borrowers in the year to June 30, and IRD had been working to better communicate with borrowers and make it easier for them to repay their debt, but couldn't say whether there had been an increase in the second half of the financial year after the first arrest was publicised in January.

"We certainly have an increased amount of contact from overseas-based borrowers following the arrest at the border, as we continue to grow our social communications," White said.

Green MP James Shaw asked whether the new IT system the IRD is in the process of building would be able to handle a progressive rate of repayments for loan borrowers, as one hypothesis was that a variable rate would encourage low earners to stay and make repayments sooner. Ferguson said the system would be able to do that, but not for the next couple of years.

"The new system has got the ability for us to be more flexible in how we are thinking about tax administration," she said.