MP seeks limited amnesty as tax owed in Rotorua at $76m

FILE

While national tax debt rose to more than $5 billion in 2014, tax debt fell in 11 out of 17 tax regions, including Rotorua.

Rotorua residents and businesses owed Inland Revenue nearly $76 million in unpaid tax and penalties in 2014, nearly $4 million less than the previous year.

Inland Revenue has stepped up collection efforts, with spending on pursuing tax debt increasing from $38 million in 2009 to $90 million in 2014, increasing the amount of overdue tax collected by $752 million last year.

Two contrasting views have emerged in the debate on what to do about the debt, which has hovered around the $5 billion mark since 2011 increasing from $4.5 billion in 2009.

Rotorua MP and Revenue Minister Todd McClay said Inland Revenue's current direction was working, with tax debt reducing in most regions when looked at year to year.

But Labour MP Stuart Nash thinks there needs to be a change in how Inland Revenue treats tax debt.

"That's an awful lot of uncollected tax. Good on them for managing to collect a bit extra, but it's still increasing overall and we need to do something different," he said.

Mr Nash said only a fraction of the debt was for tax owed, most of it came from penalties and interest. He said if the IRD took a more co-operative approach, with a limited amnesty, letting people know that if they worked with them to pay back uncollected tax the penalties could be reduced or even removed.

"There's a whole lot of the debt that will never be recovered [as things stand]. It's better to get people engaged and paying something back, if they're not engaging they're not paying and nobody wins."

Mr McClay said amnesties had proven ineffective in other OECD countries and Inland Revenue wouldn't be implementing one here.

"Most taxpayers pay their fair share and IRD actively pursues those who do not. Sometimes payments or returns are late for a reason and I would encourage people to pick up the phone and talk to IRD as there are ways they can help, such as grace periods, instalment plans and relief from penalties and interest. An amnesty is not likely to prove fair to those who do pay their tax on time."

Mr Nash said he wasn't advocating for a total removal of penalties and interest.

"Some level of interest is fair to keep on. . . " he said.