Wage subsidy extension needs focus: critic
‘‘ZOMBIE’’ companies could be kept alive while more viable firms struggling to retain staff could fall by the wayside following the Government’s extension to the wage subsidy scheme, a leading tax specialist says.
In the Budget last Thursday Finance Minister Grant Robertson announced the scheme would be extended for eight weeks from June 10 to companies whose revenue had dropped by more than 50% on the month the year previous.
Findex managing director Scott Mason said the $3.2 billion extension should try to identify which companies were ‘‘salvageable’’ and which were ‘‘zombies’’ or ‘‘don’tneedits’’.
‘‘Is this 50% revenue drop the best mechanism to triage worthy cases, or are we keeping zombie companies alive at the expense of supporting companies in the 20%50% revenue drop band that actually would have a chance of survival and retaining more staff with more support?’’
Mr Mason said there was a review that did something similar when businesses requested help from the Government’s Regional Business Partners scheme.
‘‘Yes, this has more complexity and a slight time delay . . . but may be a better quality spend of money that NZ Inc is having to borrow,’’ he said.
Southern Colour Print is one Dunedin company receiving the wage subsidy at the moment — $174,280.80 for 26 staff.
Managing director Sean McMahon praised the scheme so far but was not sure if his company would qualify for the extension.
‘‘We have only been back open for three weeks and as yet have not been able to determine the full impact on the business.
‘‘In the coming weeks and months the picture will become much clearer. I would welcome any extension to wage subsidy as it would buy more time.’’
Staff had agreed to work four days a week ‘‘in the near term’’, Mr McMahon said.
‘‘While these are challenging times and like most business we have taken a hit to revenue, the business has responded to the challenge to . . . ride out the current business downturn.
‘‘Staff have been extremely supportive in the efforts to navigate the immediate challenges,’’ he said.
At United Machinists, where 16 staff are being propped up by a wage subsidy payment of $109,644.00, chief executive Sarah Ramsay said she was not sure if her company would continue to get the wage support with the lifting of the threshold.
‘‘There’s probably a lot more companies in that 20% to 50%,’’ she said
‘‘A 30% drop is still pretty significant and raising that bar up to 50% is a pretty broadbrush approach.’’
There was also a concern companies might be incentivised to ensure their revenue is lower than 50% to get the wage subsidy.
‘‘That would be a terrible idea and it would just slow down everyone.’’
She said her firm’s books for May would be misleading because it was rushing to complete orders from March and April — when it could not operate during the lockdown — and that would artificially prop up this month’s figures.
Speaking on Friday one day after opening for Level 2, Craft Bar & Kitchen owner John Macdonald was confident his business would hit the 50% revenue drop threshold.
‘‘I will be, sadly, within that 50% bracket.
He said he had not yet made any staff redundant.
‘‘I’ve got to give it a bit of time to see how it’s going to bed in [outside] of lockdown.’’
He hoped more people would start going out for meals ‘‘to support local businesses’’.