Unpaid Tax Bill Raises Concerns Over Economic Stress and Collateral Damage

New Zealand businesses owe over $1.4 billion in unpaid GST and PAYE for the 2025 tax year, highlighting a growing concern within the economy. This staggering figure, revealed by Inland Revenue, signals significant financial strain on many sectors. Commentators warn that the situation could lead to 'collateral damage' for other creditors if unpaid tax debts are not addressed promptly.

The data, which spans from the 2018 to 2025 tax years, shows that $48 million remains unpaid from 2018, with the most recent year alone accounting for $1.471 billion. Of this, $432.9 million relates to employer activities, and $1.047 billion is attributed to GST. Over $66 million of the debt comes from businesses or individuals who are bankrupt or in liquidation.

Construction is the sector with the highest unpaid tax debt, totaling nearly $1 billion over the years, followed closely by rental, hiring, and real estate services at $533.5 million. On a per-thousand-enterprise basis, electricity, gas, water, and waste companies have the highest unpaid tax burden in the most recent tax year.

Robyn Walker, a tax partner at Deloitte, emphasized that the data indicates a growing urgency for Inland Revenue to collect outstanding debts. She warned that if businesses prioritize paying other suppliers over tax obligations, it could lead to severe consequences for other creditors. 'There's potential for a lot of collateral damage if Inland Revenue is allowing tax debt to accumulate,' she said.

Walker also advised struggling businesses to consult their accountants to ensure they are still viable and to explore options for support. She noted that businesses failing to meet PAYE obligations may not be sustainable and could be breaching directors’ duties.

Simplicity chief economist Shamubeel Eaqub added that the data reflects the distress many businesses are experiencing. He stressed that unpaid tax debts are not just a financial issue but also a legal and ethical one, as PAYE and GST are collected on behalf of New Zealanders. 'It's not your revenue,' he said. 'There's a risk to other creditors.'

Inland Revenue has written off over $110 million in unpaid tax debt each year from 2018 to 2024, with the most recent figure at $7.6 million in the last tax year. This trend underscores the increasing difficulty in collecting outstanding debts and highlights the need for stronger enforcement.

As the economic landscape continues to evolve, the government and regulatory bodies must remain vigilant in addressing these unpaid tax obligations to prevent further economic instability and protect other creditors from the fallout.