Kerre Woodham: How can IRD allow child support arrears to get to more than $1 billion?

How on earth can the IRD allow child support arrears to get to more than $1 billion?   

I could understand it if chasing up payments involved men and women using telephones and ledger books, sharpening their pencils to make fresh calculations - but in this age of technology and electronic payments and with IRD having the power to rifle through bank accounts, it seems inconceivable that it could be allowed to get to this.  

Even taking into account much of the money owed will be made up on interest and penalties... $1 billion. $1.023 billion to be precise, is a staggering amount. One of the overdue payments is a debt of $2.5 million, now 10 years old. Inland Revenue (IRD) won’t say how it came to be that size. All it will say is that the amount is “currently under a payment arrangement”. 

Nor will the IRD be drawn on just how the amount of unpaid child support reached $1.023 billion, owed by 97,597 debtors as at April 30 this year. Nearly $434.2m of the total is in penalty fees. The oldest debt dates back 32 years since the IRD began administering the Child Support Act in 1992. 

Family lawyer, Sharon Chandra, says it comes down to resourcing.   

“They either don't have sufficient resources to allocate towards the debt recovery side of things or that I suppose it's not enough of a priority to reallocate some of their existing resources. And the natural consequence of that is that you've just got this accumulating debt which obviously has, has reached a billion dollars."

Now, how can chasing up a billion dollars, a billion with a bit, not a myth, a billion dollars not be a priority. 

It seems extraordinary and I know that there are all sorts of different areas that IRD you know, can be working in with student loans and with companies and with Covid payments and with chasing up small business holders and the like and also the rich people who use sophisticated accounts to hide as much of their funds as possible. 

So, they don't have to pay tax on them. 

So, I get that they've got plenty to be getting on with. 

But a billion dollars we could do a lot with. 

Would an amnesty work?  According to an AUT senior lecturer in taxation, it could.  Ranjana Gupta says that offering voluntary disclosure would substantially reduce administrative costs in cross-checking the millions of lines of additional data received under the AEOI policy. 

To administer such a program effectively, the IRD must use the best strategies to encourage voluntary declaration. For example, the opportunity to declare should be offered once only. Enforcement strategies and sanctions for non-compliance should be credible, consistent and clear. 

Tougher penalties and interest would apply to those who choose not to take advantage of the program. Research shows a well-administered tax amnesty program facilitates strong engagement. 

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