Although most taxpayers pay their tax on time, the Inland Revenue Department (Inland Revenue) acknowledges that tax debt is growing at a rate that is outpacing Inland Revenue's capacity to deal with it. As at 30 June 2008, there were 202,000 cases of tax debt, totalling $4.036 billion.
Inland Revenue has estimated that total tax debt could more than double within five years unless it takes a different approach to managing the debt.
Inland Revenue is aware of the challenges it faces, and is updating its tax debt strategy to respond to these challenges. It is proposing to better understand taxpayers, provide taxpayers with improved online tools, and pilot new approaches designed to enhance its processes for collecting tax debt.
My staff looked at how Inland Revenue manages its tax debt collection role. They examined whether Inland Revenue was taking a strategic approach to debt management, effectively identifying and recovering debt, and adequately monitoring and reporting its performance in managing tax debt. Although Inland Revenue's management of tax debt was satisfactory once debt cases were assigned to its debt officers, I agree with Inland Revenue that its overall approach to tax debt management is insufficient to control the growth in tax debt.
K B Brady
Controller and Auditor-General
16 June 2009