The IRD have introduced new regulations that allow the Commissioner to disclose information about a taxpayer’s tax debts to approved credit reporting agencies if certain preconditions are met. (These new regulations are found in section 85N of the Tax Administration Act.)One of these preconditions is that the amount of the taxpayer’s reportable unpaid tax must be greater than the prescribed amount of $150,000, or the debt must overdue by more than a year and is more than 30% of the taxpayer’s gross income. Other conditions include that the Commissioner must have made reasonable efforts to recover the amount, and must have formally notified the taxpayer.
Before the new rule was introduced on April 1 2017, the IRD was obliged to keep information about a taxpayer’s debt secret. The IRD’s reasoning behind changing this rule was that it will benefit both the Crown and the taxpayer’s potential creditors:
- • It will benefit the Crown because taxpayers would not want their information disclosed to creditors, so would be more likely to pay their tax bills.
• It will benefit the people taxpayers do business with, as they will be able to find out about any outstanding debt with IRD before entering into commercial transactions. A large debt with IRD would represent increased risk for a business entering into a commercial arrangement, so it is of benefit for it to be disclosed. Any disclosure of debt may significantly affect your ability to borrow money, and even if you can, what interest rate will the bank make you pay? Remember also that if the IRD were to disclose your debt, it would stay on your credit record for at least five years. Therefore, it is very important to deal with it before this happens. If you are concerned that your credit rating is at risk of being damaged because you have outstanding debt with IRD, talk to us at GRA. We are very experienced at negotiating on behalf of our clients, and it is far better to be upfront and come to an arrangement than to bury you head in the sand and have your information disclosed to a credit agency.