In a rare move, the Inland Revenue is using debt collectors to gather outstanding tax and student-loan payments.
It is the first time the taxman has resorted to hiring external debt-collection agencies since a study on collecting child-support payments in 1996, and accountants say the move is borne out of growing pressure to increase the tax take, coupled with shrinking staff resources.
IRD is running a trial from this month until November using two debt-collection companies to chase 15,000 domestic tax debtors and 500 Australian-based student-loan defaulters.
Last week, late payers were sent a letter advising them they had 10 working days to pay up or their details would be sent to debt collectors.
IRD's tough approach in recent months includes texting and calling debtors to ask how they plan to meet their obligations.
"This study is seen as one of the next steps in better understanding how efficient key aspects of our debt-collection practices, processes and technology are when compared with the private sector," a department spokesperson said.
New Zealand Institute of Chartered Accountants tax director Craig Macalister said revenue debts were growing and IRD was exploring options for maximising recovery.
He said the IRD was often too slow to act and left small amounts uncollected too long so that they grew into large amounts, and was inconsistent in its approach.
The Tax Agents Institute of New Zealand had been given an alert about the trial, tax working group spokesman Terry Baucher said.
"We have reservations about [outsourcing tax collection] because this is really a function of government."
Agents had been assured there were plenty of safeguards around it, such as making police and tax checks on all the debt-collection agency staff involved.
But some of the debts were not necessarily proven, particularly in the case of GST and PAYE default assessments.
"It's small businesses that are going to bear the brunt of this," Mr Baucher said.
Kumeu tax agent Denise Maffey believed the move was to do with an out-of-control debt problem and staffing cutbacks.
The Public Service Association last week said nearly 200 jobs would be slashed from provincial IRD offices as the organisation undergoes a national restructuring.
- The Herald on Sunday
