The construction industry has emerged as a particular concern, the department said, with active Waikato construction businesses owing about $40m in PAYE.
Morris said PAYE and GST were taxes collected on behalf of employees and customers and should not be treated as business cashflow.
“We understand cashflow can be challenging, and it can be tempting to hold on to tax for a short time. But it quickly becomes costly.”
Holding on to PAYE could result in significant penalties and interest, and in some cases may amount to a criminal offence, he said.
As part of a wider push to recover outstanding tax, IRD has stepped up debt collection activity.
Measures include reporting more companies to credit agencies, making deductions directly from business bank accounts and pursuing liquidation where appropriate.
The department has also been working directly with businesses across the Waikato, with local staff educating owners about their tax obligations and speaking with construction workers on site.
Morris urged businesses facing financial pressure to seek help before tax debt became unmanageable.
“If you think you may miss a payment, contact us early so we can help you manage it. We want Waikato businesses to succeed; that is good for the region and for everyone.”
IRD said its Hamilton teams had been working alongside construction businesses and their tax agents to resolve significant debt.
The figures come as the agency continues to expand its compliance activity across Waikato.
More than 400 audits were completed in the region during the last financial year, uncovering more than $60m in undeclared tax.
According to IRD, more than half of those audits identified tax issues.
“Our systems are getting better at identifying businesses where things do not look right, so we focus our audit work where there is a good likelihood of finding issues,” Morris said.
“We do not want to get in the way of businesses doing the right thing, but it is only fair that everyone pays the tax they are meant to pay.”
The Waikato Herald has approached the Waikato Chamber of Commerce and Registered Master Builders for comment.
Registered Master Builders said it did not want to comment.
Tom Eley is a multimedia journalist at the Waikato Herald. Before he joined the Hamilton-based team, he worked for the Weekend Sun and Sunlive. He previously worked as a journalist at Black Press Media in Canada and won a fellowship with the Vancouver Sun.