Govt Boosts Crackdown on Tax Evaders with Major Budget 2025 Investment

The New Zealand Government has announced a significant increase in funding to strengthen Inland Revenue’s capacity to track down and recover unpaid taxes, with the goal of ensuring fairness and restoring confidence in the tax system. Revenue Minister Simon Watts revealed that Budget 2025 will allocate an additional $35 million annually to Inland Revenue for tax compliance and debt collection efforts.

Addressing a Growing Tax Gap

The move comes amid mounting concerns over the rising level of tax debt in New Zealand. By the end of 2024, the country’s unpaid tax bill had surged to $8.5 billion—a figure that Minister Watts described as "unacceptable" during a period of tight fiscal constraints.

“Hard-working Kiwis who pay their taxes are being ripped off by tax cheats who deliberately evade their obligations,” said Watts. “At a time when the Government is carefully managing every dollar to fund the essential frontline services Kiwis rely on, it’s essential we crack down on those who are not paying their share of tax.”

Return on Investment in Compliance

The new investment builds on existing compliance funding measures. Notably, Budget 2025 also extends the $27 million per year compliance initiative that was first introduced in Budget 2022 and was set to expire in June 2025. The continuation and expansion of funding are expected to significantly amplify Inland Revenue’s effectiveness in collecting outstanding taxes.

Watts highlighted that the payoff from previous investments is already visible. “In the year to March 2025, Inland Revenue collected almost $3 billion of overdue debt and is on track to collect more than $4 billion by 30 June,” he said. “This increased investment will accelerate that.”

Strong Economic Rationale

The Government estimates a substantial return on investment (ROI) from the enhanced compliance program. For every dollar spent on compliance activities, the return is expected to be $4 in the 2025/26 fiscal year. By 2026/27 and beyond, that ROI is forecasted to rise to $8 for every dollar spent.

Watts emphasized that the financial returns are not the only benefit. “Every dollar we recover is another dollar we can devote to funding schools, hospitals, and law and order. Investment in tax compliance delivers real results for Kiwis.”

Building Long-Term Capacity

Part of the new funding will be used to build Inland Revenue’s internal capacity to evaluate the broader impact of audit and compliance activities. This initiative will align with international best practices, enabling New Zealand to refine and optimize its compliance strategies.

“We want to know that the funds we allocate are a prudent use of taxpayer dollars,” said Watts. “That’s why a small portion of the funding will be used to develop internal capability to assess the indirect effects of audit activity.”

National Implications

This renewed focus on tax compliance reflects the Government’s broader fiscal strategy: tightening financial discipline while ensuring that those who shirk their responsibilities are held accountable. By aggressively pursuing tax evasion, the Government aims to rebalance the tax system, create a more level playing field for all New Zealanders, and unlock much-needed revenue to support essential public services.

Minister Watts concluded by reaffirming the Government’s commitment to fairness and fiscal responsibility: “All New Zealanders benefit when everyone pays their fair share. This investment ensures we uphold that principle.”