Government agencies are more likely to write off unpaid tax than welfare debt, new research shows.



Victoria University accounting and commercial law associate professor Lisa Marriott's research showed Inland Revenue (IRD) was more likely to write off unpaid tax, whereas the Ministry of Social Development (MSD) would often keep welfare debts on its books, sometimes until people died or retired.



Tax debt totalled nearly $6 billion, while welfare debt was about $1b, she said.



"There appears to be no basis for treating debtors to the two government agencies differently," Marriott said.



The study indicated tax debtors got off more lightly, she said.



IRD was more likely to negotiate with debtors and collect core tax, and write off penalties and interest, Marriott said.



Between July 1, 2011, and June 2012, IRD wrote off nearly 50 per cent of interest and penalties applied to overdue tax, amounting to $374 million.



It wrote off $435m in core debt, reflecting 11.6 per cent of collectable debt, the study showed.



MSD wrote off $8.7m in core debt, or 2.1 per cent of collectable debt.



The study showed that in the same period, the average value of outstanding tax debt was $14,479 per taxpayer in debt, while the average value of outstanding welfare debt was $2523 per beneficiary in debt.



More resources were applied to collecting welfare debt than tax debt, Marriott said.



MSD would collect debts from beneficiaries' payments, she said.



If the debtor was not a beneficiary when they retired, the welfare debt would be collected from their superannuation, or in some cases their estate after they died, Marriott said.



The more punitive approach to managing welfare debt appeared to reflect the underlying view of those on welfare as less deserving, she said.



Taxpayers, even those who did not pay their taxes, were viewed as providing a greater contribution to society and therefore worthy of preferential treatment, Marriott said.



However, she believed there was more to the uneven approach to debt management.



IRD viewed itself as a revenue collection department rather than a debt collection department, she said.



It was responsible for collection of 91 per cent of government revenue, whereas MSD was responsible for 37 per cent of government expenditure, Marriott said.



In addition, tax debt represented about 10 per cent of total tax revenue, while welfare debt amounted to 4.1 per cent of total social welfare expenditure.



It was "perverse" that IRD would write off such a large amount of penalties and interest for debtors when other taxpayers were meeting their obligations, she said.



"It's hard to see how it encourages compliant behaviour."



Marriott said taxpayers could apply for financial relief from IRD, but this was not an option for welfare debtors.



She said tax non-compliance and welfare offending were also likely to be treated differently in the justice system, in terms of prosecution and sentencing.



MSD debt included loans for essential living expenses that had not been paid back and overpayments to welfare beneficiaries.