Inland Revenue will lift internal barriers that previously stopped it from sharing information about company tax debts with credit-reporting agencies.
It has also launched a broader initiative focused on pursuing overdue GST and PAYE debts that are under one year old.
“The continued growth in the tax debt has been a growing problem, and the evidence of many zombie companies – with large tax debts when they are liquidated – has been growing from numerous mentions of the large tax amounts owing when these companies go under,” Deloitte partner Alan Bullot said.
He said it appeared some companies were relying on Inland Revenue as a last-resort lender when they struggled to pay GST or PAYE.
“I don’t think people are aware of the potential problems that can create for them down the line,” Bullot stated.
“We consider it very likely that none of the companies that have failed owing large tax debts recently had their information passed on to the approved credit-reporting agency, despite the existing legislative powers.”
“These latest Inland Revenue announcements show that Inland Revenue has started to take this seriously, and any company that does have tax debts needs to take steps to deal with them. They will not be able to just wish them away.”
Bullot explained that legislation passed in 2017 aimed to grant Inland Revenue the authority to inform credit agencies when a company had substantial unpaid taxes.
“However, the additional internal policies that Inland Revenue put in place around the legislation resulted in the powers being very difficult to use in practice, and they have only been used fewer than 20 times since 2017.”
“In that time, the total outstanding tax debt has gone from $3 billion to $9.3 billion as of 31 March 2025, and we expect it is closer to $10 billion now.
“It is almost as if Inland Revenue tied their own hands behind their back and have now decided to untie their hands. While there is a need to balance a taxpayer’s right to secrecy and other businesses’ right to know they are not trading with a company that has significant tax debts, we think the balancing of these interests has favoured taxpayers with tax debts too much.
“These Inland Revenue announcements are a good first step to rebalance these points, but more may be needed.”
He said the department was concerned about possible consequences if it mistakenly reported debt to a credit agency, but it could likely be trusted to report accurately.
Bullot said Inland Revenue had a responsibility to inform about the potential tax credit risks posed by businesses that failed to meet their tax obligations, in fairness to those that complied.
“If a business engages with Inland Revenue about their tax debt and enters into payment arrangements with Inland Revenue, then the credit-reporting agencies would not be notified.
“This means companies with tax debts can’t just ignore the Inland Revenue and need to proactively manage their situations. Unfortunately for some businesses, this may mean facing up to some harsh truths about the ability of the business to keep trading.
“As sad as this may be, hopefully, this would protect other businesses that are viable from becoming collateral damage due to the trading credit they advance to zombie companies with large tax debts.”
He said that although no one wishes for a business to fail, there are often unintended consequences.
Inland Revenue is considered a preferential creditor during company liquidation, meaning its debts are settled before those owed to others, like customers.
Bullot said this meant Inland Revenue had a duty to manage tax debt responsibly and avoid letting penalties and interest increase the amount it could recover ahead of other creditors.
“If Inland Revenue have let the tax debt grow by letting people lodge GST returns and PAYE returns and not pay it for a long period of time, there kind of almost needs to be a ‘quid pro quo’ that, if they’re not going to be sharing the information of the outstanding tax debts with the wider community, then they should also lose their preferential creditor rights.”