Dave Ananth reports that as the IRD systems prioritise tax debt enforcement, even reasonable proposals to them to sort out an issue become harder to get accepted. You must have a credible plan to avoid compounding costs

By Dave Ananth*

For most taxpayers, there is a reasonable assumption that if the law has not changed, outcomes should broadly remain the same. Increasingly, that assumption no longer holds.

In recent times, Inland Revenue has not materially altered the legislation governing tax debt, penalties, or use-of-money interest. What has changed, quietly but decisively, is how long the department is prepared to wait before enforcing those rules, and how much practical weight is placed on the exercise of commercial judgement along the way.

In practice, this shift is becoming clearer. Taxpayers with very similar facts are experiencing markedly different outcomes. One is given time, flexibility, and a workable path back to compliance. Another is escalated quickly, locked into position, and left dealing with compounding interest and enforcement pressure.

The difference is rarely the law itself. It is timing, discretion, and judgement.

Commercial judgement is real but uneven

Inland Revenue officers are empowered to exercise commercial judgement. This is neither controversial nor new. Officers can assess repayment proposals, consider hardship, and determine whether enforcement is appropriate in the circumstances.

In practice, however, that discretion is applied unevenly.

Some officers are prepared to step back, assess the broader commercial context, and allow time for a taxpayer who is engaging constructively to stabilise their position. These cases often resolve through manageable instalment arrangements and a realistic recovery plan.

Others apply discretion far more narrowly. Delays are treated quickly as non-compliance, flexibility is limited, and enforcement follows sooner. Once use-of-money interest and penalties begin to compound, even a relatively modest tax issue can become entrenched and difficult to unwind.

From a practitioner’s perspective, this variability is unsettling. Outcomes can hinge on who is managing the file, how quickly they act, and whether they are prepared to pause enforcement long enough for a solution to take shape.

Waiting is no longer neutral

What has changed most noticeably is Inland Revenue’s tolerance for delay.

Historically, many taxpayers could expect a longer runway, reminders, follow-ups, and opportunities to engage before matters escalated. That is no longer a safe assumption.

Today, the window between initial contact and enforcement is often shorter. Instalment arrangements are reviewed more frequently. Missed payments trigger faster responses. In some cases, enforcement steps are initiated while discussions are still ongoing.

Recent public statements and reporting support this shift in emphasis. Inland Revenue has been explicit in recent years that it is focusing earlier on overdue tax, including relatively small debts, and that ignoring tax obligations will lead to faster escalation. Media coverage has also highlighted increased use of enforcement tools and a reduced tolerance for prolonged non-engagement.

What is less visible in that reporting, however, is how this shift plays out at the file level, where timing and individual discretion increasingly determine outcomes for taxpayers with otherwise similar circumstances.

This does not suggest Inland Revenue is acting unlawfully or unreasonably. But it does mean that waiting now carries risk. Time is no longer neutral. Each week that passes without a structured and credible proposal increases the likelihood that discretion hardens into enforcement.

Similar facts, different outcomes

In practice, it is increasingly common to see:

• two businesses with comparable GST arrears
• two individuals with similar student loan repayment histories
• two taxpayers who miss provisional tax payments by similar margins

yet experience very different outcomes.

One is given space to restructure cashflow and resume compliance. Another faces default notices, account deductions, or escalating use-of-money interest that quickly overtakes the original tax.

From a system perspective, this inconsistency is problematic. Predictability matters. Taxpayers can plan for strict rules, they struggle when outcomes depend too heavily on timing and individual discretion.

The real cost is uncertainty

Most taxpayers accept that tax must be collected. What causes the greatest difficulty is not enforcement itself, but unpredictable enforcement.

When similar cases are treated differently, confidence in the system erodes. Businesses delay decisions. Individuals hesitate to engage for fear of making matters worse. Ironically, this behaviour increases the very non-compliance Inland Revenue is seeking to reduce.

Clearer signalling around timeframes, expectations, and escalation points would assist both taxpayers and the department. Greater consistency in how commercial judgement is applied would also reduce uncertainty.

A practical lesson for taxpayers

The practical takeaway is straightforward, if uncomfortable, early engagement matters more than ever, but only if it is structured.

Contacting Inland Revenue without a plan, without realistic numbers, or without an appreciation of how quickly matters can escalate is no longer enough. Waiting in the hope that issues will resolve themselves is a high-risk strategy.

Once enforcement momentum builds, even reasonable proposals become harder to accept. By then, the issue is no longer just tax. It is time, credibility, and compounding cost.

Conclusion

Inland Revenue has not changed the law. It has changed how long it waits, and how decisively it acts once patience runs out.

For taxpayers, the risk is no longer simply getting things wrong. It is getting them wrong at the wrong time, with assumptions about flexibility that no longer apply.

That uncertainty, more than the tax itself, is now the real challenge facing taxpayers.

^References

• ^{Student Loan Scheme Act 2011 (No 62) — ss 146, 146A, 147, 189, 195}
• ^{Student Loan Scheme (Interest Rate for Overseas-Based Borrowers) Regulations 2024 — sets 4.9% base interest rate}
• ^{Office of the Ombudsman Case W53310 (2018) — confirms interest accrual cannot be reversed}

Dave Anath is Special Counsel at Stace Hammond Lawyers. His background, profile and contact details are here.