This report sets out the findings from an initial analysis of debt owed to two government agencies: Ministry of Social Development (MSD) and Inland Revenue (IR). It has not been designed to aid debt recovery, but to fill a gap in our understanding about the nature and characteristics of debt and debtors as a starting point from which further research can be undertaken. It therefore both provides insights and identifies areas that merit further investigation. The key insights from our research can be summarised as follows:
- Of the people with debt to at least one of MSD or IR, 12 percent or 87,800 people owe debt to both.
- The overlap between people with debt to MSD and people with debt to IR is very dependent on the type of IR debt. People with Child Support or Working for Families tax credit debt to IR are much more likely to also have debt to MSD than people with Income Tax, GST, or PAYE debt.
- There are large differences in the financial circumstances and demographic characteristics of people who owe different types of debt to MSD or IR. For example, people who owe Income Tax are much more likely to have higher material wellbeing and to be older than people who owe Child Support debt.
- People’s debt to the government shows significant persistence. We observed 68 percent of people with debt to MSD and 39 percent of people with debt to IR had at least one debt that had lasted more than three years. In addition, we observe people with debt continuing to gain more debt, and people moving both out of, and back into, debt within a single year.
The research is subject to two key limitations. First, it is unable to consider non-government debt or debt held by other government agencies and hence only provides a partial picture of all debt. Second, it only considers debt at the individual level and hence does not address the dynamics of debt at a family or household level. This research project was initiated prior to the COVID-19 pandemic and examines 2018 debt data. As a result, it does not consider effects from the pandemic. Instead, it provides a baseline understanding of debt to MSD and IR and identifies a range of options for further policy-focused research. The original research design also included debt managed by the Ministry of Justice. However, due to New Zealand’s lockdown in response to the pandemic, this data was not ready at the time of our analysis.
Purpose
This report sets out the findings from an initial analysis of debt owed to two government agencies: Ministry
of Social Development (MSD) and Inland Revenue (IR). It has not been designed to aid debt recovery, but to
fill a gap in our understanding about the nature and characteristics of debt and debtors as a starting point
from which further research can be undertaken. It therefore both provides insights and identifies areas that
merit further investigation.
Key Results
The key insights from our research can be summarised as follows:
- Of the people with debt to at least one of MSD or IR, 12 percent or 87,800 people owe debt to both.
- The overlap between people with debt to MSD and people with debt to IR is very dependent on the
type of IR debt. People with Child Support or Working for Families tax credit debt to IR are much more
likely to also have debt to MSD than people with Income Tax, GST, or PAYE debt. - There are large differences in the financial circumstances and demographic characteristics of people
who owe different types of debt to MSD or IR. For example, people who owe Income Tax are much
more likely to have higher material wellbeing and to be older than people who owe Child Support debt. - People’s debt to the government shows significant persistence. We observed 68 percent of people with
debt to MSD and 39 percent of people with debt to IR had at least one debt that had lasted more than
three years. In addition, we observe people with debt continuing to gain more debt, and people moving
both out of, and back into, debt within a single year.