Inland Revenue made applications to wind up more than 120 business in November. Photo: RNZ
Inland Revenue made applications to wind up more than 120 business in November, as it draws to the end of a year in which it moved to liquidate almost 900 businesses with tax owing.
Keaton Pronk, an insolvency practitioner at McDonald Vague, said the 167 winding up applications in November, including 127 from IRD, was the highest in six years. It included a group of 45 sushi companies.
For the year to November, Inland Revenue (IRD) applied to wind up just under 900 companies.
"In January they had advertised 100 which was massive compared to what they had done in previously Januaries.
"They always ramp up towards the end of the year but they've exceeded what they've done in the last five years quite easily."
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He said IRD had taken a soft approach through the Covid years but now significantly changed its approach.
"You look at the winding up applications they did over that time, sometimes they weren't doing any in a month, they were just posting …then their debt is now blowing out to $9 billion and they've got a government sitting there saying we want that money so we can spend it, which is reasonable. They have bills that they need to pay.
"So IRD is now taking an approach where they need to try and go and collect that $9b."
He said there was a new generation of business owners that had never dealt with a hard-line IRD.
"This is what they've done in the past…but you've got a bunch of your business owners that weren't operating back then. So they don't recall the IRD taking a tougher approach.
"Because their debt has blown out, they can't allow it to continue to grow because there's a reason we all pay taxes and everyone should be paying their fair share evenly and it's IRD's responsibility to go out there and collect that."
He said he did not expect to see any let-up in 2026.
"It's going to take at least until the middle of next year at a minimum. They are still going to be pushing hard.
"The debt is not specific to one industry or one business type - what we're dealing with is very widespread and it's taking a while to resolve. It's not a quick recession, it's gone on for a couple of years and every industry is affected."
He said the work was paying off for IRD because it had a rate of return of about eight times what it spent on its recovery efforts.
Pronk said people should not be taken by surprise by the efforts.
"IRD certainly sends out a lot of correspondence to let them know that they're in debt.
"It's whether or not they've chosen to ignore it. I mean, some of the appointments that we see is just simply a case where they haven't kept their registered office updated on the company's office or the contact details with the IRD.
"It's not just the IRD, it's other creditors that have chased businesses and they'll say, well, we never knew. And it's your responsibility to keep your contact details for your registered office correct.
"The thing with IRD debt is it's very hard to claim that you didn't know you owed it if you're paying staff and you're not paying the PAYE, what do you think is going to happen here?"
Pronk said it was rare to see any liquidation where there was not a Covid loan or some other sort of IRD debt.
Chartered Accountants Australia New Zealand spokesperson John Cuthbertson said he expected IRD's debt to hit $10b soon.
"There's still quite a bit of work to be done and a combination of old debt and new debt and they're certainly taking a tougher stance on new debt as well."
He said the IRD's liquidation activity had stepped up by about 30 percent in the last year.
Liquidating companies did not give as much of a return as some other enforcement work, he said.
"They've said to us that they don't get much return from that despite having preferential claims for both GST and PAYE, but overall it's an important action for them to take in terms of overall integrity of the tax system and in reality… it's really the last rites for zombie companies.
"Even though you're seeing a lot of liquidations, they do see it as their last resort and it's often because they can't make contact with the taxpayer. So, the taxpayer will ignore all attempts by IR to contact them, you know, emails, in-person phone calls and eventually they just have no other option but to start the proceedings."
He said there were hundreds of thousands of arrangements in place to pay tax by instalment.
"Ideally, they'll want to get as much money as they can out of their overdue tax debt from a taxpayer but, in some cases, there's just nothing to be had."
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