Students may pay debt online

By RICHARD WOOD

Inland Revenue wants to allow students to repay their loans overseas by credit card via the internet.

The scheme is being considered as part of a five-year "e-enablement strategy" for online access to IRD services.

Non-custodial parents will be allowed to meet their obligations in the same way.

But students are wary of the proposal.

University Students' Association co-president Andrew Campbell said there was a danger of graduates paying more or getting into financial difficulties.

"Students would need to be careful that they should not put it onto their credit card if they are not in a position to repay that credit card.

"That's no skin off IRD's nose because they will be getting their money anyway, but it will certainly have an impact on the student."



An IRD spokesman, Colin MacDonald, said he had no problems with accepting credit cards for overseas payments.

"It is currently rather expensive for those people to service those requirements. I think it is an appropriate response because it makes it easier for them."

To send a bank draft from Australia costs $26 each time and can take a few days. Paying from other countries can be more difficult, depending on their banking systems.

Mr Campbell agreed there was a benefit to using credit cards, because of the problems in paying the IRD from overseas.

"We are not necessarily opposed to it. If you do pay and then you pay it [your credit card balance] off then it is just a method of transferring money."

But he said he would prefer the IRD to work with overseas banks, so they could provide direct payments to New Zealand. Another way might be for the IRD to work with overseas tax authorities to collect the money.

"Essentially this is transferring the loan onto your credit card where the interest rate is a lot higher.

"It will mean their student loan will end up costing them more than it would otherwise."

Mr MacDonald could not give a firm timetable on the plan, although a feasibility study had started. At some stage the IRD would also consider the use of credit cards to pay tax bills.

He said merchant service fees were an issue. These could be between 2 and 4 per cent and could not generally be charged to the payer.

Mr Macdonald said there was an issue about "appropriateness".

"How appropriate it is for people to be using credit cards to pay tax?"

Jeff Owens, tax director for the Institute of Chartered Accountants, said it was positive that the IRD was looking to be more flexible and was prepared to look at credit cards. He was not aware of any legal obstacles to the use of credit cards for paying tax, but said a range of issues would have to be explored, including service charges, cost of funds, and impact on taxpayer behaviour.

He said he would use his own credit card for paying tax because it enabled him to manage his finances better. Collecting rewards such as airpoints was a side benefit.