Revenue is available to fund government programmes and services

The New Zealand Government requires a stable, predictable revenue system to fund its programmes and services.

IR collects approximately 85% of core Crown revenue and it’s our responsibility to maximise that amount over time. In the short term, doing this well will help improve the Government’s fiscal position faster and support growth. Into the long term, everything that IR does affects New Zealanders’ confidence in the fairness of the tax system and willingness to pay tax voluntarily.

The Government’s investment between 2015 and 2022 transformed IR and the tax system to ensure most New Zealanders get the right tax treatment at the right time, with minimal effort. We’ll continue to invest in and leverage this system to achieve Government objectives now and into the future.

The cost to collect $100 in tax is 46 cents, down from 80 cents in 2015. This is largely due to the considerable growth in tax revenue in recent years, but also because of efficiencies such as our automated systems and a large amount of tax that is collected at source, for example PAYE paid by employers and withholding tax sent by financial institutions.

Tax revenue has grown considerably since 2021 but flattened out this year. This increases our focus on maximising revenue. Every dollar not assessed or collected is money that cannot be invested by the Government.

Most of our people will continue to work every day on helping customers get it right from the start. We will work to:

• collect 94% or more of tax with minimal effort and cost
• simplify tax compliance for small businesses
• provide all businesses with the guidance and support to manage their tax obligations
• minimise growth in overdue debt
• assess more revenue and protect the tax system through compliance and enforcement activities.

In 2024–25, the Government expected to spend in these areas*:

• Social security and welfare - $47.7b
• Health - $30.9b
• Education $20.9b
• Core government services - $8.3b
• Law and order - $7.0b
• Transport and communications - $5.9b
• Economic and industrial services - $3.9b
• Defence - $3.3b
• Environmental protection - $2.7b
• Housing and community development - $2.4b
• Heritage, culture and recreation - $1.5b
• Primary services - $1.3b
• Other - $255m
• Government Superannuation Fund pension expenses - $50m

*From the Treasury’s Budget Economic and Fiscal Update 2025, published in May 2025:

Budget Economic and Fiscal Update 2025 (PDF 1.407KB)

Simplifying tax for small businesses

Businesses, both small and large, are key to economic growth in New Zealand.

IR works proactively with businesses of all sizes, from micro to small-to-medium-sized enterprises (SMEs) through to significant enterprises including multinational enterprises.

All companies play an important role in the tax system, in paying their own tax but also in the employer obligations they have such as filing for their employees and passing on PAYE every pay day.

The overall cost of complying for micro and SMEs is higher than we want. These customers make up the majority of New Zealand firms. They face the highest compliance costs relative to the amount of tax they pay. It also costs us more to collect tax from them.

New work is underway to help reduce their compliance costs, enhance their compliance and improve our own efficiency.

To make significant improvements, IR needs to work with tax intermediaries and others in the wider digital ecosystem. The ecosystem is a dynamic and evolving network of interconnected stakeholders—including government, businesses, individuals, services, and technologies—that continuously exchange data and deliver services.

We’re focused on building strong relationships within the ecosystem and working together to make improvements such as those we’re seeking for small businesses.

Certainty for large taxpayers

Companies turning over $30 million (significant enterprises) and high-wealth individuals largely file and pay on time and carry out their obligations as employers—as such they are major contributors to our tax base.

We work closely with significant enterprises throughout the year. We provide assistance to help their systems work with ours, provide certainty around tax laws and ensure they comply with tax obligations, which can be complex.

Our compliance managers continuously review the accounts of these customers and give ongoing advice. Annual risk reviews rate each enterprise by their behaviour and structure. Some of our customers are account managed and receive a tailored customer service and interventions to improve their experience and long-term compliance.

This approach works well as both IR and stakeholders in significant enterprises are assured that the right tax is being assessed and that it will be paid.

We will continue to work with customers in this group on important aspects such as their tax governance. We also want changes to the tax system that affect their (often bespoke) systems to be managed effectively.

IR will continue to play an active role as an OECD member to tackle global tax problems and carry out a specific compliance work programme for multinational enterprises. You can read more on this on the following page.

Tax and payments this year

*Of the tax paid in full and on time this year, including PAYE and employer deductions:

• Significant enterprises paid 68% of it - $75.1b
• SMEs paid 21% of it - $23.1b

Minimising overdue debt

Overdue debt is a significant issue and priority for both the Government and IR.

As debt continues to grow and gets older, it becomes an increasing cost for the Government, which impacts its financial position. This means minimising overdue debt is a key component to maximising revenue.

Unpaid debt affects all New Zealanders. Take GST, for example. When consumers buy goods and services, the GST portion is intended to be passed directly to IR. If businesses fail to do this, they’re effectively using public money—paid by consumers—to fund their operations, rather than contributing to essential government services such as health and education.

GST and employer-related debt, which is also tax and contributions that should have gone straight to IR, makes up 57% of all overdue tax and entitlements debt.

This year, IR collected $4.3 billion in tax and entitlements debt, the highest amount since 2018. However, the overall overdue amount is $9.3 billion, including penalties and interest. It is growing faster than both GDP and tax revenue.

Tackling debt in new ways

IR’s approach to debt management uses a set of collection approaches that are comparable with other tax authorities overseas.

Over time, New Zealand’s ratio of tax debt to tax revenue has been relatively low and compares favourably to similar tax administrations. It sits at 7.7%. However, due to the growth in tax debt, the ratio is worsening.

We recognise that continuing to do the same things won’t significantly reduce debt and write-offs. We’re taking an organisation-wide approach and, based on what our data tells us, ensuring resources are focused on areas that will get the best returns.

• Our preference is to keep working with people in debt to return them to being compliant taxpayers. We’ll let customers know about the help available, treat people with respect and manage debt in a fair and transparent way.
• We won’t retreat from making hard decisions to secure overdue payments.
• We’ll make more use of our tools to support staff doing debt collection work.
• We’ll keep evolving our analytics capabilities and develop new interventions to shift customer behaviour.

Note: We are unable to provide penalties and interest debt relating to tax and entitlements for the years before 2021, as reporting before that date also included penalties and interest on student loans-related debt.

Taking on emerging and enduring risks proactively

The integrity of the tax system faces enduring and emerging risks from a relative few people or organisations who won’t pay their fair share.

As well as causing the Government to lose revenue, wrongdoing unchecked has a corrosive effect on the morale and willingness of customers who do the right thing voluntarily.

The tax system has seen rapid changes in technology and globalisation. Threats are rising from cyber-crime, artificial intelligence (AI) and social media that quickly spreads information on perceived tax evasion methods or system weaknesses. Overall trust in government is also declining. The changes also mean there are opportunities to use these technologies, including AI, in countering bad actors and in improving our efficiency.

Going into 2025–26, IR’s compliance work programme will focus on more proactive and data-driven risk management. Our constant focus on understanding customers’ circumstances, motivations and behaviours continues. We’ll look to spot shifts in perceptions and emerging local and global risks before they escalate.

Our systems and processes are designed to stop a lot of non-compliance from happening. We are also leveraging smarter tools, including those built on new AI, to improve efficiency and deliver reliable outcomes.

Integrity of the tax system is also a component of the Government’s Tax and Social Policy Work Programme, with work including implementing international tax initiatives such as the Crypto-asset Regulatory Framework.

In Budget 2025, we were allocated an additional $35 million in permanent annual funding for compliance and collection activities. We were also allocated $26.5 million to continue activities that had been supported by time-limited funding due to end in June 2025.

This investment will enable us to expand our audit and enforcement capacity, improve data automation and increase the number of targeted interventions in high-risk areas such as property, trusts, organised crime and the hidden economy.

How we go about our compliance work is important. One of the ways we do things at IR is to act with integrity, which is doing the right things, being open and accountable.

Results from the March 2025 Te Taunaki Public Service Census conducted show this resonates strongly with our people. 89% agreed that our organisational culture supports people to act with integrity, which is a strong basis for IR to maintain the fairness of the whole system.

Proactive, data-driven risk management in property compliance

Property remains the main investment choice for many New Zealanders, with around 80,000 residential properties sold each year, worth $60 billion. Taxing provisions around property can be quite complex, which is why we maintain an active programme to improve compliance.

Property compliance is an area where we’ve improved outcomes year-on-year and reduced key risks that may result in property owners and developers not paying their fair share of tax.

This year, we implemented a new automated system for managing GST alerts. Previously, we tracked properties that had a potential GST liability manually. Alerts were triggered when properties changed hands, prompting us to review and assess GST obligations for individual properties. We could track around 9,000 properties at any time, each requiring significant staff input.

The new system draws on real-time property transfer data from Land Information New Zealand (LINZ) and monitors approximately 377,000 properties with potential GST liabilities. 

It has significantly reduced our time spent on routine monitoring, which leaves more time for more proactive compliance management. 

Further work is underway to automate messaging to customers at the point an alert is generated—this prompts them to meet their GST obligations.

IR’s data intelligence platform enables us to anticipate the potential tax context of a range of property transactions and keep customers well informed of their obligations. As we continue to refine the accuracy of property transactional data and its context for each customer, more automation becomes possible. 

We’re constantly working with our partners at LINZ as well as commercial suppliers to improve the data available to us.