$9.3 billion in debt and climbing
Inland Revenue is running the most aggressive debt collection operation in nearly a decade, and the weight of it is landing squarely on domestic businesses.
IRD’s 2024-25 Annual Report showed the department collected $4.3 billion in overdue tax and entitlements debt, the highest figure since 2018. Total overdue debt climbed to $9.3 billion as of June 2025, up from $7.9 billion a year earlier, with the number of customers in debt rising from 512,000 to 527,000.
The composition of that debt tells you exactly who is carrying the load. GST and employer-related obligations like PAYE, KiwiSaver and student loan deductions make up 57% of all overdue debt. These are the taxes that hit operating businesses every month. IRD’s own report conceded that compliance costs for micro and SME customers remain higher than desired, acknowledging these firms make up the majority of New Zealand businesses but face the steepest burden relative to tax paid.
IRD’s April 2026 compliance evaluation confirmed the system works well enough for domestic taxpayers: 96% of returns filed on time, 94.5% of tax paid on time, at a cost of 46 cents per $100 collected. Budget 2024 compliance funding drove a sharp increase in audit activity and discrepancy identification. The machine is working. It is just pointed in one direction.
$3 billion in revenue, $8 million in tax
In May 2025, Newsroom reported that Google, Amazon, Facebook and Tesla paid a combined $8 million in New Zealand tax on $3 billion in combined revenues in 2024. Microsoft managed $15 million.
The mechanism is straightforward. Google NZ earned over $1.1 billion from Kiwi advertisers and cloud customers in 2024 but transferred $1.05 billion as a service fee to a Singapore sister company, leaving just $87 million booked as domestic revenue and a $4.3 million tax bill. The other multinationals follow variations of the same playbook. Reports have noted that combined inter-company fees from Google NZ, Facebook NZ, Microsoft NZ and Amazon Web Services NZ totalled almost $2.6 billion in 2024.
None of this is illegal. It is the structural outcome of a system that taxes profits where they are booked, and these companies book almost nothing here.
The government killed the fix
The previous Labour government introduced a Digital Services Tax Bill in 2023. The Regulatory Impact Statement estimated implementation would cost IRD $2.4 million but collect $86-90 million per year, applying a 3% levy on revenues from digital services for companies with global revenues above €750 million.
In May 2025, Revenue Minister Simon Watts discharged the bill. Treasury had forecast $479 million over four years from the DST, and projected $4 billion in average annual revenue from these companies through 2029 that would have been subject to the levy. Watts cited the risk of US retaliatory tariffs.
That rationale deserves scrutiny. The UK, France and Australia all operate digital services taxes. None has faced meaningful US trade retaliation. New Zealand dropped the only tool it had to address the imbalance, and pointed instead to the OECD’s Pillar Two minimum global corporate tax. But Pillar Two targets a 15% floor on global profits. New Zealand’s 28% corporate rate already exceeds that. The problem is not the rate, it is that profits are structured away before they reach any New Zealand entity.
There is a tool that already exists
Tax expert Nick Miller’s analysis, published by Tax Justice Aotearoa, has argued that a large portion of the service fees sent offshore are in substance royalty payments for intellectual property use. Under existing New Zealand source taxation rules, royalties paid to non-residents are subject to withholding tax. Reports have suggested that reclassifying these fees could yield $130 million in additional tax revenue from a single company, with hundreds of millions available across the sector.
This matters because it sidesteps the US retaliation argument entirely. Enforcing existing withholding tax obligations is a compliance action, not a new sector-specific levy. It requires no legislation, no trade negotiation, no OECD consensus.
The competitive neutrality problem
This is not a redistributive argument. A Kiwi business owner paying GST, PAYE and income tax on revenues earned in New Zealand competes directly against platforms that face a structurally lighter burden. Google’s advertising tools, Amazon’s cloud infrastructure, Facebook’s marketing reach are services New Zealand businesses both buy and compete against. The companies providing them pay effective tax rates no domestic firm could replicate without routing its business through Singapore.
IRD is demonstrably capable of collecting from half a million domestic debtors. The question is whether the government has the will to apply the same rigour to a handful of multinationals that are extracting billions from this economy while contributing almost nothing to the public infrastructure they rely on. The tools exist. The revenue is there. What is missing is the political appetite to use them.
Sources
- Newsroom: Dropping digital tax frees big tech to ship $4b revenues offshore (2025-05-22)
- Inland Revenue Annual Report 2024-25 (2025-10-29)
- IRD: Tax and entitlement debt statistics
- IRD: Preliminary evaluation assessment of direct effects of compliance activity (2026-04-13)
- Regulatory Impact Statement: Digital Services Tax (2023-08-31)
- RNZ: Squeezing a bigger slice of the tax pie from big tech companies
- NZ Herald: Big profits, minimal tax – new report on how to make Google, Facebook pay fair share of tax