IRD says it takes individual approach to troubled businesses

Tuesday 7th December 2010 1 Comment

Inland Revenue says it works with businesses in trouble on a case by case basis, despite claims from tax agents the department refuses to speak to them in some cases when they are trying to resolve client tax debt.

New Zealand Institute of Chartered Accountants (NZICA) tax director Craig Macalister said there was generally a good relationship between tax agents and Inland Revenue.

But NZICA was receiving complaints from tax agents, mainly from the Wellington area, that Inland Revenue was refusing to engage with them over client tax debt matters.

In some cases Inland Revenue had not responded at all, and in others it had told the tax agent it would only meet if payment was received in full, and liquidation action would continue unless payment in full could be made, Macalister said.

Inland Revenue worked on a case by case basis with businesses experiencing difficulties to try to find a "viable" solution, group assurance manager Martin Scott said.

"We know some businesses are struggling and we have been urging them to talk to us early so we can discuss options to help them meet their obligations.

"When a customer gets into serious debt and is not meeting their obligations, Inland Revenue takes a range of steps to try to get them back on track," Scott said.

If that was not possible, Inland Revenue was not able to knowingly allow a business to continue if it was insolvent.

"We regularly review cases we issue legal proceedings against to ensure we are doing so appropriately," Scott said.

"Initiation of proceedings is a step taken as an absolute last resort when all efforts to recover the debt owing have failed."

Macalister said tax agents played a large role in the overall operation of the tax system, from giving clients guidance on their tax positions to ensuring clients filed and paid on time.

When the financial crisis hit, Inland Revenue advised NZICA it would take an understanding approach when taxpayers were facing debt issues as a consequence of the economic downturn.

That was happening for a while, but seemed not to be the case any longer, particularly for those based in Wellington, Macalister said.

NZICA could understand Inland Revenue's frustration when taxpayers continually failed to meet obligations.

"However, many of these taxpayers are facing very tough times and that is the reality of the situation. It also does not help when Inland Revenue do not respond or just refuse to meet with the tax agent."

NZPA

Comments from our readers

On 8 December 2010 at 7:28 pm arty said:

A business that is not in profit and or not paying it's bills, is selling it's goods and or services for less than it costs to operate the business, undercutting those that do pay the bills on time every time. Managing credit risk is part of the business cost structure. Seems the IRD is being criticised for managing credit risk on our behalf. If a business in trouble does not pay it’s tax the burden is spread over all business.