Australia to Use Private Collectors for Unpaid Taxes

The Australian equivalent of the Internal Revenue Service is launching its own private debt collection program after a successful trial last year, according to an official release last week.

The Australian Taxation Office said that it has formed a “private collection panel” comprised of collection agencies to help it chase some US$8.9 billion in unpaid taxes. The Tax Office said that after a competitive bid process, four private debt collection agencies were chosen to do the work: Dun & Bradstreet Australia, Baycorp Collection Services, National Credit Management, and Recoveries Corporation Group.

The announcement comes after a successful trial conducted in 2006 with Dun & Bradstreet Australia where the company collected $18.4 million, according to the Tax Office.

Australian newspaper The Sydney Morning Herald reported yesterday that the tax agency watched carefully the conduct of the private collectors in the trial, noting it would be important as the program expands. “In the trial we made every effort to ensure our activities were respectful and professional,” Commissioner of Taxation Michael D’Ascenzo told The Herald. “We received very few complaints from people who were contacted through that initiative.”

The majority of the debt the collectors will go after is business debt rather than individual tax debt. In addition, some $263 million in superannuation contributions from Australian employers will be on the initial account distributions. Superannuation is a government-mandated private pension plan in Australia.

Second Commissioner of Taxation, Jennie Granger, said in the release, “The panel will help us follow up more quickly and encourage people and businesses to pay their debts. Our debt collection strategies, including the establishment of this panel are about fairness and creating a level playing field for everyone.”

All of the tax debt accounts will be worked on a contingency basis, with none available for purchase by the collection agencies. The government has allocated $36.9 million to get the program going.

The plan comes as Australian consumers are racking up debt on credit and charge cards. The country’s Reserve Bank reported last week that Australians have now racked up $36.1 billion in credit card debt as of the end of August, an all-time high. A separate report from consulting firm KPMG showed that Australians paid $15.9 billion in August to service credit card debt, a very high total for a country with a population of 21 million.