Enhancing Transparency in Reporting GST and PAYE Tax Debts in New Zealand: Legal and Practical Perspectives articles

This article examines the critical issue of transparency in the reporting of tax debts relating to Goods and Services Tax (GST) and Pay As You Earn (PAYE) obligations in New Zealand. Drawing upon the  opinion of Dave Ananth, Special Counsel at Stace Hammond Lawyers, it explores the legal framework underpinning GST and PAYE as trust monies, the implications of non-compliance, and the case for reinstating access to tax debt information within credit reporting systems. The discussion highlights the potential benefits of such transparency for creditors, stakeholders, and the integrity of New Zealand’s tax administration.

Introduction

In New Zealand’s tax regime, GST and PAYE obligations impose fiduciary duties on businesses to collect and remit taxes on behalf of the Crown. These amounts are statutory liabilities, held in trust rather than as assets of the company. Despite this clear legal position, instances of companies failing to meet their GST and PAYE obligations have increased concerns about financial transparency and the protection of stakeholder interests.

Dave Ananth,  has advocated for enhanced transparency regarding tax debts, particularly in relation to GST and PAYE. His commentary, as featured in recent media, underscores the need for improved disclosure mechanisms to alert creditors and the public to financial distress signalled by unpaid tax debts.¹

Legal Framework Governing GST and PAYE

GST as Trust Money

The Goods and Services Tax Act 1985 (the “GST Act”) establishes GST as a tax imposed on the supply of goods and services by registered persons. ²

Section 8 Imposition of Goods and Services Tax on Supply

Subject to this Act, a tax, to be known as goods and services tax, shall be charged in accordance with the provisions of this Act at the rate of 15% on the supply (but not including an exempt supply) in New Zealand of goods and services, on or after 1 October 1986, by a registered person in the course or furtherance of a taxable activity carried on by that person, by reference to the value of that supply.

PAYE Obligations

Similarly, PAYE operates under the Income Tax Act 2007 and the PAYE rules. Employers are legally required to deduct income tax from employees’ wages and remit these amounts to the Commissioner. Section RA 5 (2) of the Income Tax Act 2007 provides that:

“An amount of tax withheld from a PAYE income payment must be  withheld at  the time the person makes a payment….” ³

This system ensures that tax is collected at source and held in trust by the employer, reinforcing the fiduciary duty to forward these amounts promptly to the tax authority.

Problematic Non-Compliance and Lack of Transparency

Despite the clear statutory framework, non-compliance in remitting GST and PAYE is not uncommon. Companies sometimes accumulate substantial tax debts, which may be symptomatic of deeper financial distress or mismanagement of trust monies.

Dave Ananth highlights this concern:

“These funds are not the company’s own — they are monies held in trust for the government, collected from employees and customers. When companies fail to remit these amounts, it’s a red flag that should not be hidden.” ⁴

This misuse of trust monies undermines the integrity of tax administration and transfers undue risk to creditors and other stakeholders who may be unaware of the company’s true financial position.

Reinstating Tax Debt Disclosure in Credit Reporting

Former Revenue Minister Judith Collins proposed in 2017 that companies with tax debts exceeding $150,000 should have such debts disclosed in credit ratings. The rationale is that unpaid GST and PAYE debts at this threshold are indicative of serious financial distress and potential insolvency risks.⁵

Ananth supports this proposal, advocating for:

“Reinstating access to tax debt information within credit ratings, to provide a crucial warning to creditors and the public and encourage responsible business practices.” ⁶

Such transparency would enable creditors, suppliers, and investors to make informed decisions, mitigating the risk of exposure to financially unstable entities.

Practical and Policy Implications

The reinstatement of tax debt disclosure in credit ratings would have multiple benefits:

1. Protecting Stakeholders: Creditors and suppliers can better assess the risk of extending credit or entering into contracts.
2. Promoting Compliance: Businesses would face increased incentives to meet their GST and PAYE obligations promptly.
3. Safeguarding Trust Monies: Reinforces the fiduciary nature of GST and PAYE, ensuring these funds are not misappropriated.
4. Enhancing Tax Administration: Supports Inland Revenue’s efforts to improve tax collection and reduce arrears.

From a policy perspective, this transparency aligns with the Crown’s interest in protecting public revenues and maintaining confidence in the tax system.

Conclusion

New Zealand’s tax law clearly identifies GST and PAYE as trust monies, with statutory obligations imposing fiduciary duties on businesses. The accumulation of unpaid tax debts, however, remains a significant concern, masking financial distress and exposing stakeholders to risk.

Dave Ananth’s call to reinstate disclosure of tax debts in credit ratings is a measured and legally supported proposal that promises to enhance transparency, promote responsible conduct, and protect both creditors and the Crown’s interests.

1. Dave Ananth, Special Counsel, Stace Hammond Lawyers, quoted in “Companies fail to hand over GST and PAYE spotlight,” The Post (9 September 2025) https://www.thepost.co.nz/business/360788273/companies-fail-hand-over-gst-and-paye-spotlight. ↩︎
2. Goods and Services Tax Act 1985, s 13, available at https://www.legislation.govt.nz/act/public/1985/0141/latest/DLM81035.html. ↩︎
3. Income Tax Act 2007, s RA 5, available at https://www.legislation.govt.nz/act/public/2007/0097/latest/DLM1519961.html. ↩︎
4. Ananth, above n 1. ↩︎
5. Judith Collins, proposal for tax debt disclosure in credit ratings, 2017, cited in “Companies fail to hand over GST and PAYE spotlight,” The Post, above n 1. ↩︎
6. Ananth, above n 1. ↩︎