Inland Revenue said the arrest was a "last resort".
"She was trying to get money she knew she wasn't entitled to."
More than 900 reports of the hoax have been received.
The department is refusing to hand it the money it took back.
But the 550,000 who underpaid tax will have to pay it back.
Treasury is putting it down to a transition to a new Inland Revenue system.
Taihia thought the $12 million was the $12,000 she was expecting.
The botch-up comes as the IRD is trying to simplify the tax system.
She says IRD has frozen her account after the payout.
The harrowing story of a young woman retraumatised for nearly a decade.
Tax refunds will soon be automatic and online.
The IRD is getting ready for a busy financial year.
He could also owe interest and costs of $60m.
They're telling targets there's a warrant out for their arrest.
"We need a tax system that's fair."
Hayden Jones didn't hand over $381,325 in PAYE deductions.
Refunds will be sent out automatically.
Close to 3000 workers will down calculators.
They have had about 700 notifications about the scam.
The Public Service Association said people will see delays due to the strike.
More than 4000 MBIE and Inland Revenue workers will walk off the job next month.
Police are warning Kiwis to ignore the calls.
All five of the companies he involved in the offending are now in liquidation.
They have serious concerns for thousands of staff working for Inland Revenue
If the money is unclaimed, it goes into the Government coffers.
Oxfam says big businesses and the "extremely wealthy" are driving inequality.
Kiwis living across the ditch who are defaulting on student loan repayments are being warned to pay up or expect a knock on the door by debt collectors.
Tertiary Education Minister Steven Joyce says for every dollar the Government spends chasing down student loan defaulters, it gets back $15.
Tax lecturer Deborah Russell says a review of NZ's foreign trust rules has delivered "exactly the outcome we needed" to fix our damaged reputation.
If we are allowing some people to avoid paying tax in their country then that's a tax haven, isn't it? But has the sky fallen in here? Nope.