Only 4% of wage subsidy returned
Despite strong growth in business earnings over the past two years, New Zealand firms have paid back just $801.8 million of the almost $20 billion in subsidies handed out by the Government through the pandemic.
Since March 2020, a range of wage subsidies, leave support payments and short-term absence payments have been available to help businesses retain jobs through lockdowns.
Ministry of Social Development data shows that, up to July 15, $19.5b had been paid out.
Businesses were encouraged to repay subsidies if it was found that they did not meet the criteria for the payments – a 30% decline in revenue initially, increasing to 40% for later subsidies.
Many big businesses faced pressure to repay when they went on to report large profits. The Warehouse Group repaid $68m in the subsidy and Briscoe Group also paid back what it received.
Treasury accounts are expected to show that corporate tax revenues have leapt 60% over the past two years, reflecting increased business profits. But so far, only $801m has been repaid.
Robyn Walker, tax partner at Deloitte, said whether more subsidies should be repaid was something businesses could potentially be asking themselves if they were in a positive financial position.
She said the lack of big increases in the level of wage subsidy repayments might be related to who claimed the wage subsidy.
‘‘While the original wage subsidy was claimed by many businesses of all sizes, later wage subsidies were predominately claimed by smaller businesses.’’
Council of Trade Unions economist and director of policy Craig Renney said the total repaid was about 4% of the amount paid out.
‘‘Given that we were working in highly exceptional circumstances, and in a very high trust model, it’s very hard to establish an ‘acceptable level’ of subsidy that should be returned.
‘‘For many firms, this funding was necessary, and they used it appropriately to support their employees during what was a really challenging time. But other firms appear to have done well despite Covid, with profit levels up significantly from last year.’’
Social Development Minister Carmel Sepuloni said the Government did not have set expectations for how much would be paid back. She said the ministry changed its approach over time and carried out more targeted integrity checks with Inland Revenue, which prompted more repayments.
‘‘They believe the vast majority of businesses that received wage subsidies did so honestly. The vast majority of times where wage subsidies were wrongly claimed, it was an honest misunderstanding about eligibility rather than a deliberate attempt to deceive.’’