Prime Minister Jacinda Ardern says the cost of recovering $350 living costs from New Zealanders living abroad would outweigh the benefits.
The government supports the way the payment is being rolled out, despite knowing that some ineligible people will receive it.
The first installment – of $116 – will be paid today to New Zealand taxpayers over the age of 18 who have earned up to $70,000 in the past fiscal year and are not entitled to the winter energy payment.
An unknown number of New Zealanders living abroad have received letters from the Internal Revenue Service (IRD) stating that they are eligible for living expenses even though they are not New Zealand tax residents.
Ardern said the vast majority of those who would receive the payment were New Zealand taxpayers based in New Zealand.
“But we also acted quickly and so there will be some that will be caught by the system, who are not part of the criteria designed, but who may be receiving it.”
The payment would be distributed by IRD using an automated system, so it wasn’t always possible to find out if there were people living in New Zealand and the cost would outweigh the benefits, she said.
The alternative to letting these individuals receive the payment would have been an application-based process that would have taken too long and may not have reached the most vulnerable, Ardern said.
“The alternative in creating a perfect system would be to create a less timely payment and possibly not reach those who need it most.”
The payment was one of the measures the government used to help New Zealanders deal with the rise in the cost of living in the wake of the Covid economic recovery, she said.
“Yes, we moved quickly, but so did the economic situation.”
The payment was still more limited and targeted than a broad tax cut, Ardern said.
A tax cut would likely also contribute to inflation, but offering a targeted, time-limited payment would limit the possibility of that, according to the Treasury, she said.
Ardern couldn’t say how many people who were ineligible for the benefit had received it, but said the Inland Revenue (IRD) could have that number.
Ardern said she had asked IRD whether individuals who were abroad could be identified based on the interest they paid on their student loans.
National calls integrated payment ‘a big mess’
The deputy leader of the National Party, Nicola Willis, said it was impossible to know the magnitude of the problem, but she felt it was bigger than just a few thousand dollars.
It was not just ex-pat New Zealanders, but also former migrants, she said.
“We were contacted by a man who left New Zealand in 2014, he now lives in India and he received a letter from the IRD telling him he would get the payment.”
National had also been approached by former French visa holders and a man who left in 2019 but is now in the Philippines and has also received letters, she said.
“My feeling is that this is very widespread, it’s a big mess, it’s like the government has pressed ‘send everything’ – it is certainly not the target and I find ministers rejecting this quite disrespectful,” she said.
“What a slap in the face to the hard-working Kiwi taxpayers who only pay taxes to give that to people around the world who in some cases haven’t paid taxes in New Zealand for years.”
Willis said the issues arose because it was an on-the-fly policy and she had a lot of sympathy for IRD who is supposed to run it.
“Both the Treasury and the IRD explicitly warned the government against this approach, advising them that this is not a good way to go. They said ‘some people who are not eligible will eventually get it, it will be very administratively complex. We don’t want to do this’ and yet the government pressed play anyway and now we see the results.”
National would prefer tax cuts over a government benefit, since the only people who would get the money would have earned it in the first place, Willis said.