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Govt accused of bias with debt collection

Tuesday 13 Aug 2013 10:07 p.m.

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The Government is being accused of being tougher on beneficiaries than tax payers when it comes to collecting debt.

New research from Victoria University shows you're more than five times as likely to have tax debt written off, than welfare debt.

"We treat debtors to those two Government agencies quite differently," says Victoria University tax professor Lisa Marriot.

Her new research shows Inland Revenue wrote off 11.6 percent in core debt last year - that's $435 million.

While the Ministry of Social Development wrote off just 2.1 percent, or $9 million. 

That's despite tax debt totalling almost $6 billion each year, while welfare debt is at about $1 billion.

Ms Marriot says it shows taxpayers get preferential treatment.

Even if they're not paying their taxes, which sometimes they're not. So we do seem to treat people differently just because they are on welfare,” says Ms Marriot.

The Salvation Army says 80 percent of its customers owe Work and Income money.

"It seems that debt is recovered from them in a much more punitive and quicker approach than those who are getting away with not paying tax, so it's not a fair approach."

Welfare debt comes about through overpayments, fraud or in the majority of cases, loans for things like school uniforms or emergency dental work.

Tax debt includes unpaid tax, evasion and fraud.

"We are talking the haves and the have not's. We are talking about people with different levels of resources," says Ms Marriot.

But, Revenue Minister Todd McClay says there can be good reasons to write some tax off.

"Businesses that are finding it a little bit difficult to meet their obligations can stay in business and keep employing New Zealanders," says Mr McClay.

The Minister says comparisons between the two Ministries are unhelpful, partly because there are under half a million kiwis on benefits, but more than 7 million tax customers.

Mr McClay also believes taxpayers and beneficiaries are not treated differently.

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