Welfare debt tackled more than tax fraud

LAURA WALTERS
Last updated 05:00 14/08/2013

Relevant offers

Politics

Continuing fall in forecast dairy payout is concerning, says Bill English Helen Clark says women are still being held back by 'family duties' Steven Joyce downplays economic recession talk Northland bridges: going once, going twice 'We genuinely like each other', says NZ First trio Council claws back rebuild power Ron Mark new NZ First deputy Two new housing areas in south Auckland to provide 1800 homes More than one in five Auckland homes is being sold within two years Murray McCully's peace aspirations gives the knockers material

Government agencies are more likely to write off unpaid tax than welfare debt, new research shows.

Victoria University accounting and commercial law associate professor Lisa Marriott's research showed Inland Revenue was more likely to write off unpaid tax than the Ministry of Social Development (MSD) was to write off welfare debts.

MSD would often keep welfare debts on its books, sometimes until people died or retired.

Tax debt totalled nearly $6 billion, while welfare debt was about $1b, she said.

"There appears to be no basis for treating debtors to the two government agencies differently," Marriott said.

The study indicated tax debtors got off more lightly, she said.

Inland Revenue was more likely to negotiate with debtors and collect core tax, and write off penalties and interest, Marriott said.

Between July 1, 2011, and June 2012, Inland Revenue wrote off nearly 50 per cent of interest and penalties applied to overdue tax, amounting to $374 million.

It wrote off $435m in core debt, reflecting 11.6 per cent of collectable debt, the study showed.

MSD wrote off $8.7m in core debt, or 2.1 per cent of collectable debt.

The study showed that in the same period, the average value of outstanding tax debt was $14,479 per taxpayer in debt, while the average value of outstanding welfare debt was $2523 per beneficiary in debt.

More resources were applied to collecting welfare debt than tax debt, Marriott said.

MSD would collect debts from beneficiaries' payments, she said.

If the debtor was not a beneficiary when they retired, the welfare debt would be collected from their superannuation, or in some cases their estate after they died, Marriott said.

The more punitive approach to managing welfare debt appeared to reflect the underlying view of those on welfare as less deserving, she said.

Taxpayers, even those who did not pay their taxes, were viewed as providing a greater contribution to society and therefore worthy of preferential treatment, Marriott said.

However, she believed there was more to the uneven approach to debt management.

Inland Revenue viewed itself as a revenue collection department rather than a debt collection department, she said.

It was responsible for collection of 91 per cent of government revenue, whereas MSD was responsible for 37 per cent of government expenditure, Marriott said.

In addition, tax debt represented about 10 per cent of total tax revenue, while welfare debt amounted to 4.1 per cent of total social welfare expenditure.

It was "perverse" that Inland Revenue would write off such a large amount of penalties and interest for debtors when other taxpayers were meeting their obligations, she said.

Ad Feedback

"It's hard to see how it encourages compliant behaviour."

Marriott said taxpayers could apply for financial relief from Inland Revenue, but this was not an option for welfare debtors.

She said tax non-compliance and welfare offending were also likely to be treated differently in the justice system, in terms of prosecution and sentencing.

MSD debt included loans for essential living expenses that had not been paid back and overpayments. 

- The Press

Special offers
Opinion poll

Should the speed limit be raised to 110kmh on some roads?

Yes

No

Vote Result

Related story: 110kmh limit moves closer

Featured Promotions

Sponsored Content