Dunedin residents are being targeted in a new tax scam, prompting warnings from police.

There are reports of unsuspecting members of the public being used as money mules through the scam.

Local police say residents are receiving phone calls and being told they can collect a tax rebate, but first they must agree to donate a percentage to charity.

If people agree, money is put into their bank account and they're told to withdraw it and forward it to a charity in India via Western Union.

Police say the money's stolen and residents are being used to transfer it offshore.

They say any request for charity in order to claim tax is not legitimate.