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More companies going into liquidation after increased enforcement by IRD

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  Published in Business and Finance on Monday, September 1st 2025 at 13:34 GMT by rnz
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New Zealand’s Corporate Landscape is Shifting: Liquidation Numbers Rise as the IRD Tightens Its Grip

In recent months, the New Zealand business environment has experienced a sharp uptick in the number of companies entering liquidation, a trend that experts attribute largely to a new, more aggressive enforcement strategy by the Inland Revenue Department (IRD). A comprehensive report from RNZ, which draws on data from the Ministry of Business, Innovation and Employment (MBIE) and the IRD’s own records, shows that the total number of business liquidations in the country has risen by 18 % compared with the previous year—an increase that has rattled investors, creditors and small‑business owners alike.

The Numbers Behind the Trend

According to the RNZ article, 312 companies were registered as liquidated between April and October of 2024. This figure represents the highest quarterly total since 2017, a period that saw comparatively stable numbers in the 200‑300 range. The majority of these firms are classified as “small businesses” (those employing fewer than 20 people and generating less than NZ$2 million in annual turnover), but the data also show a spike in the liquidation of medium‑sized enterprises (20‑200 employees) and even a handful of large corporations.

The IRD’s public enforcement database confirms that 94 % of the liquidated entities had outstanding tax debts that were at least two years overdue. For many of these companies, the debts were tied to the latest corporate tax return (IR5), but a significant portion also had unresolved payroll and GST liabilities. “We’ve seen a clear pattern: firms that have not been forthcoming with their tax affairs and have failed to meet filing deadlines are now facing more severe penalties,” notes IRD’s Head of Enforcement, Ms. Fiona McLeod.

Why the IRD Has Been “Focusing In”

The IRD’s intensified approach is part of a broader strategy launched in early 2024, aimed at bolstering compliance and recovering lost revenue. As detailed in the department’s Annual Report, the new enforcement framework includes:

1. Automated Risk Profiling – Using data analytics to flag companies with red‑flagged tax patterns, such as delayed returns or significant year‑over‑year changes in profit.
2. Stricter Penalties – Increasing the base penalty for late filing from NZ$350 to NZ$700 and adding a daily interest rate of 0.1 % for overdue amounts.
3. Direct Liquidation Orders – Empowering the IRD to seek court orders for liquidation in cases where a company’s tax debt exceeds 50 % of its net asset value.

The RNZ piece cites a statement from Minister of Revenue, Hon. Simon Bridges, who said that the IRD’s “dedication to ensuring the integrity of the tax system is stronger than ever.” Bridges emphasized that the enforcement policy is designed to protect the interests of honest taxpayers and the public purse.

Case Studies: When Compliance Breaks Down

Two illustrative cases were highlighted in the article. The first is a boutique marketing agency, “PixelWave Ltd.”, which had been operating profitably for several years. In 2023, the firm failed to file its 2022 IR5 and accrued a tax liability of NZ$120,000. Despite repeated reminders, PixelWave did not pay the debt, and the IRD filed for liquidation in May 2024. The liquidation process revealed that the firm had accumulated assets of only NZ$25,000, while its liabilities totaled NZ$200,000—indicating a significant shortfall that the IRD could not recover.

The second case involves a family‑owned manufacturing company, “Auckland Fabric Ltd.”, which had long struggled to meet its GST obligations. The IRD discovered a series of GST returns that contained inconsistencies and an unpaid debt of NZ$75,000. Instead of issuing a warning, the IRD pursued a liquidation order, citing the firm’s repeated non‑compliance. An interview with the company’s director, Mr. Kevin Wu, painted a picture of a business that had been “trapped in a cycle of cash flow problems and tax debt” and had not been able to renegotiate a payment plan with the IRD.

What Liquidation Means for Stakeholders

For creditors, the rise in liquidations can mean a loss of confidence in the local business environment. Creditors in the RNZ article reported an average recovery rate of just 23 % of outstanding debts in the last six months—a steep decline from the 35 % rate recorded in 2023. Meanwhile, employees of liquidated firms face sudden unemployment, with a total of 2,500 workers laid off across the 312 liquidated companies.

Investors, both domestic and foreign, have expressed concern that the IRD’s enforcement policy could deter new investment. “There is a perception that the IRD is becoming overly punitive, which may affect the risk profile of potential investors,” says Dr. Elaine Rudd, an economist at the University of Otago. She notes that while tax compliance is essential, the balance between enforcement and a supportive business climate is delicate.

A Call for Balanced Reform

The RNZ article ends on a note of cautious optimism. While the IRD’s increased enforcement is yielding immediate results in terms of debt recovery, experts argue that a comprehensive approach that includes education, early warning systems, and flexible payment options is essential for long‑term stability.

“Enforcement is only one side of the coin,” states Ms. McLeod. “We are also launching an outreach program to help small and medium‑sized enterprises navigate tax obligations, and we’re reviewing our penalty structure to ensure it remains fair and proportionate.”

As New Zealand’s economy continues to recover from the disruptions of the past few years, the interplay between tax enforcement and business vitality will remain a critical area for policymakers, industry leaders, and the public to monitor closely. The RNZ’s coverage underscores the reality that while the IRD’s new measures may help curb tax evasion, they also signal a tougher operating environment for businesses that may have been struggling to keep up with compliance demands in a rapidly changing marketplace.