IRD returns to normal tax debt collection

Inland Revenue’s grace period for tax debt is over and it is applying to liquidate greater numbers of businesses over unpaid taxes.

As part of the response to Covid19, in April last year Inland Revenue (IRD) was given discretion to be more flexible with deadlines.

As a result, the number of applications for company liquidations made by IRD dropped to zero in April, May and July last year, with one in June. But activity has significantly increased again, to 41 in November and 33 in December.

In January and February there were 42 and 56, respectively. That is higher than the same months last year, which were 23 and 27 respectively. ‘‘Both during the increased Covid alert levels last year and since then, IRD has had a strong focus on supporting businesses as much as possible to trade through any financial difficulties,’’ said Inland Revenue spokeswoman Gay Cavill.

‘‘We have been encouraging customers to access the range of Covid support packages available.

‘‘In a small number of cases, and as a last resort, IRD has used its liquidation and bankruptcy activity to address instances of significant non-compliance or where there has been business failure.’’

Auckland Chamber of Commerce chief executive Michael Barnett said the grace period should be extended. ‘‘When the grace period was first introduced, most of us thought the window for Covid might not be as long as it turned out to be.’’

Brent Norling, specialist litigation lawyer, said while liquidation numberswere down last year due to the wage subsidy and IRD not enforcing tax debt, that had changed markedly. ‘‘The reality of what happened last year is that everyone got a break because of Covid … some companies got a break when they owed a couple of years of tax… people who would have failed last year did not because they never had that catalyst.’’