The bill came due
New Zealand businesses collectively owe the government $9.3 billion in unpaid tax and entitlement debt as at 30 June 2025, up $1.4 billion in a single year. That figure is roughly what the Crown spends servicing its own debt annually, nearly half the education budget, and double the entire Jobseeker Support bill.
Companies account for $5.7 billion of it. GST debt alone hit $3.3 billion, and PAYE obligations owed by employers surged to $2.0 billion, a 33% jump in one year. Some 527,000 customers carry outstanding tax debt.
The most troubling number is the one that reveals how entrenched the problem has become. Debt older than two years leapt from $3.5 billion to $4.8 billion in the year to June 2025. That is not the kind of shortfall that resolves itself when the economy picks up. It is the kind that ends in write-offs or insolvency.
Phone calls, then bank raids, then liquidation
IRD’s customer segment leader Tony Morris said in October 2025 that the department was “ratcheting up the pressure on people who owed tax, after a period of taking a gentler approach”. Since 9 October 2025, anyone with at least $1,000 in debt aged between six months and five years has been getting phone calls. Those above $10,000 receive explicit warnings about legal consequences.
The escalation path is blunt: phone call, message, second call, in-person visit, bank account deduction, insolvency proceedings. And IRD is not waiting around. Since mid-June 2025, the department sent 16,500 bank deduction notices, 25% more than for the entire prior year. Between mid-June and 30 September 2025, 8,181 deductions were completed, recovering $17 million.
Liquidation referrals tell the sharper story. IRD referred 650 cases to court for liquidation in the year to June 2025, a 49% increase from the prior year. In the January to March 2025 quarter alone, IR-initiated liquidations hit 134, up 68% on the same period the year before. Audits were up 42% to 7,641, and IRD staff made nearly 18,000 visits to business premises and worksites.
Andrew Dickeson, tax director at Baker Tilly Staples Rodway, observed in October 2025 that IRD’s focus had shifted from helping businesses access pandemic-era supports to ensuring they meet their obligations.
The maths work for the Crown, not for businesses
From the government’s perspective, enforcement is paying handsomely. IRD collected $4.3 billion in cash from debt activities in 2024-25, the highest since 2018. Every dollar spent on compliance returned $11.81, up from $9.50 the year before. The debt-specific metric is even more dramatic: $53.08 collected for every dollar spent on debt recovery, against a target of $40.
Those returns explain why Budget 2025 delivered $35 million in additional permanent annual funding for IRD compliance and collection. When the return on investment is 53-to-1, the Treasury case writes itself.
But the flip side is $553.1 million in debt written off in the year to March 2025, up 40% on the prior year. That is the portion IRD has conceded is unrecoverable. The businesses behind those write-offs have failed, vanished, or been assessed as unable to pay.
The collateral damage nobody is pricing in
IRD is a preferential creditor. When it pushes a company into liquidation, the Crown gets paid before trade creditors, suppliers, subcontractors, and landlords. Every liquidation that clears a tax debt potentially leaves a trail of unpaid invoices through the supply chain.
Only 13.1% of total tax debt had an active repayment plan as at March 2025, despite IRD setting up 207,000 instalment arrangements in 2024-25. The vast majority of debtors are not engaging proactively.
That creates a director liability problem that is underreported. A business that has been parking PAYE obligations is not just a tax problem. PAYE and GST are money collected on behalf of the Crown. Continuing to trade while unable to meet those obligations puts directors at risk of personal liability under the Companies Act. The tax debt is the visible symptom. The governance failure underneath it is where the real legal exposure sits.
What comes next is more of the same, only harder
IRD has the funding, the returns data, and the political mandate to keep escalating. Businesses that survived the downturn by deprioritising their tax obligations now face a choice: engage with IRD on repayment terms or wait for the bank deduction notice. The department has made clear it will work through the entire debt book, starting at $1,000 and working up. For firms already stretched by expensive borrowing and weak demand, the taxman arriving at the door may be the event that tips the balance.
Sources
- IRD: Tax and entitlement debt statistics (2025-10-29)
- RNZ: Expect to be chased for even small tax debt, IRD says (2025-10-13)
- NZ Herald: Inland Revenue increases audits and liquidations as NZ’s tax debt hits $9 billion (2025-10)
- RNZ: Inland Revenue says tax crackdown paying off (2025-10-13)
- IRD Annual Report 2025: Services to manage debt and unfiled returns (2025-11-19)
- IRD: Quarterly report on managing tax debt – January to March 2025 (2025-06-10)