Otago Daily Times

GST re­turns in­crease raises ques­tions over wage sub­sidy

- NITA BLAKE­PERSEN Business · Taxes · Wellington, New Zealand · University of Auckland · New Zealand · New Zealand Ministry of Social Development

WELLINGTON: A 10% in­crease in the Gov­ern­ment’s GST re­turns this year is rais­ing fur­ther ques­tions about the huge up­take of its $14 bil­lion wage sub­sidy scheme.

Lat­est fig­ures show to­tal net GST paid by busi­nesses to In­land Rev­enue in­creased by $1.184 bil­lion for the first seven months of the year.

There was a drop off in spend­ing in April and May — GST re­turns were down 44% and then 1% com­pared to 2019, but bounced back in June and July, up 60% and then 16%.

Auck­land Univer­sity ac­count­ing pro­fes­sor Jil­naught Wong has been crit­i­cal of busi­nesses that have taken the wage sub­sidy to pay div­i­dends.

He said the wage sub­sidy was based on a de­crease in rev­enue, but the GST re­turns showed many busi­nesses had had an in­crease in rev­enue, as many peo­ple spent money in New Zealand that other­wise would have gone to over­seas travel.

‘‘So that’s a won­der­ful thing for the econ­omy be­cause it’s cre­at­ing eco­nomic ac­tiv­ity in New Zealand, and that’s great.’’

He ques­tioned the el­i­gi­bil­ity cri­te­ria for get­ting the money, which re­quired a drop of 30% in rev­enue, as well as busi­nesses draw­ing on their cash re­serves, and took ex­cep­tion with Ful­ton Ho­gan, which re­cently paid a div­i­dend af­ter re­ceiv­ing the wage sub­sidy.

‘‘While they may ar­gue that they took the wage sub­sidy legally, I think morally it’s ter­ri­ble. What a thing to do.’’

Ful­ton Ho­gan has con­firmed it has paid back just un­der $1 mil­lion of the more than $34 mil­lion it claimed in wage sub­si­dies, but would not answer ques­tions about how that amount was de­cided.

It said it in­tended to re­tain the re­main­ing wage sub­sidy in line with the ob­jec­tive and cri­te­ria of the scheme.

Busi­ness New Zealand chief ex­ec­u­tive Kirk Hope warned about call­ing out spe­cific busi­nesses on the wage sub­sidy scheme, and that the GST re­turns were not nec­es­sar­ily an in­di­ca­tion that more wage sub­si­dies needed to be re­turned.

‘‘I think it re­ally comes down to the way in which in­di­vid­ual busi­nesses have been im­pacted, and that’s what the Min­istry of So­cial De­vel­op­ment will be look­ing at as well, whether those busi­nesses were im­pacted in the way that they thought they might be.’’

He said by and large, busi­nesses had be­haved well with the wage sub­sidy.

PWC tax part­ner Geof Nightin­gale said the GST num­bers showed how well New Zealand’s econ­omy had fared.

‘‘It came crash­ing back in June. ‘‘I think none of us ex­pected that in March, so it be­came a tim­ing rather than a per­ma­nent dif­fer­ence, which I think is a real sign of the suc­cess of the Gov­ern­ment’s re­sponse.’’

He said the wage sub­sidy was a gen­er­ous and ur­gent scheme, which was suc­cess­ful in its pur­pose of keep­ing peo­ple in their jobs.

The Min­istry of So­cial De­vel­op­ment is car­ry­ing out ran­dom and tar­geted au­dits of the more than 750,000 busi­nesses which re­ceived wage sub­si­dies.

Some 10,450 checks have taken place, and 867 cases have been re­ferred for in­ves­ti­ga­tion.

To date, about $500 mil­lion of the wage sub­sidy has been paid back by about 17,000 busi­nesses.

The vast ma­jor­ity of these re­pay­ments were ini­ti­ated by busi­nesses. — RNZ

Newspapers in English

Newspapers from New Zealand