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New Zealand: NZ Taxpayers Favored Over Welfare Claimants

15 August 2013   (0 Comments)
Posted by: Author: Mary Swire
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Author: Mary Swire

New Zealand's Inland Revenue Department (IRD) is more likely to write off unpaid tax in the short term than the Ministry of Social Development (MSD) is to let welfare debts slide.

According to new research by Victoria University Associate Professor Lisa Marriott, while the outstanding tax bill is almost six times larger than the welfare debt, the MSD will often keep arrears on its books until people retire or die.

New Zealand taxpayers are able to apply for financial relief from the IRD, but the MSD does not offer a similar option to welfare debtors. MSD debt includes loans for essential living expenses that have not been paid back, along with over-payments to welfare beneficiaries.

Marriott found that in the period from July 1, 2011 to June 30, 2012, the IRD wrote off nearly 50 percent of the interest and penalties applied to overdue tax, costing it NZD374m (USD276.9m). The IRD also waived NZD435m in core debt (representing 11.6 percent of collectable debt), a figure not nearly matched by the MSD's cancelling of NZD8.7m in core debt (just 2.1 percent of its collectable debt).

The average taxpayer was NZD14,479 in debt to the IRD in 2011/12, and the average indebted welfare beneficiary owed NZD2,523. Tax debt represented 10 percent of total tax revenue, while welfare debt amounted to a mere 4.1 percent of total social welfare expenditure.

Commenting on her findings, Marriott said: "There appears to be no basis for treating debtors to the two government agencies differently. However, these findings indicate that tax debtors get off more lightly. The more punitive approach to managing the debts of welfare recipients appears to reflect the underlying view of those on welfare as less deserving, while taxpayers, even those who do not pay their taxes, are viewed as providing a greater contribution to society and therefore worthy of preferential treatment."


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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