2007 was not a good year for many residents with outstanding state tax bills. The state collected $202.9 million in back taxes during the 12 months ended June 30 — an 11.4 percent increase from fiscal 2006, according to a recent Hawai'i Department of Taxation report.

The increase in collections was driven by a new tax department computer system, increased audits and a rise in the number of taxpayer initiating back-tax payment plans, said tax director Kurt Kawafuchi.

"We're trying to be a lot more vigilant," Kawafuchi said. "It's also a fairness issue.

"People that are struggling to pay their fair share (should be) more confident that we're out there making sure that other people who aren't paying their fair share ... pay their fair share of taxes."

Despite the increase in delinquent tax collections the total delinquent tax balance as of June 30 increased by $24.1 million to $343.8 million.

Taxes are considered delinquent once they're more than 30 days past due.

By law the tax department has three years to audit a return.

There is no time limit on how long the tax department has to collect back taxes.

The rise in tax collections come amid an increase in audits and audit assessments. The tax department conducted 12,765 office and field audits during the 12 months ended June 30.

In fiscal year 2007, those audits generated $159.1 million in tax assessments, versus $103.8 million in tax assessments in fiscal 2006.

During fiscal 2007, the tax department generated $20.4 million in tax assessments arising from audits of unlicensed contractors working on federal installations.

Fiscal 2007 tax collections also got a boost from a new $52 million computer system that helps identify those who do not file their taxes and high noncompliance areas, Kawafuchi said. 2007 was the second full year the system was fully operational.

Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i, said the new computer system should be driving up tax collections.

"That's why we bought it," he said. "It should be picking up more and more inconsistencies.

"The question is whether or not they can collect all that money."

Reach Sean Hao at shao@honoluluadvertiser.com.

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