Wage subsidy argument goes to court
The auditor-general is being challenged to do more to get businesses to pay back billions of dollars in wage subsidy payments they should not have received.
The Gama Foundation, a Christchurch-based philanthropic organisation, has applied to the High Court for a judicial review of the auditor-general’s overview of the scheme. The foundation is run by former Christchurch businessman Grant Nelson and his wife, Marilyn.
The wage subsidy scheme was designed to run from March 17 through to June 9, 2020, and then the wage subsidy extension scheme took its place.
More than 71% of all businesses received support under the initial wage subsidy scheme.
More than $13 billion was paid to businesses because of the Covid-19 lockdowns. The Serious Fraud Office investigated alleged abuse of the subsidy last year, after investigations by the Ministry of Social Development (MSD).
Auditor-General John Ryan reviewed the scheme and gave it general approval. He recommended that in future, MSD should more actively test a small sample of subsidy claimants.
Nelson said he was concerned Ryan failed to do ‘‘all within his power’’ to retrieve subsidies from businesses that should not have received them. He said any businesses that made higher profits in 2020 than they did in 2019 should repay their subsidies immediately. Reserve Bank data shows that in October 2020 businesses had $22.7b more in the bank than in October 2019.
Nelson estimated there was $5b overpaid due to the initial lockdown not being as long as expected and $2b that was wrongly obtained or retained by businesses.
‘‘If these billions of dollars are not repaid, taxpayers will each have to contribute thousands of dollars through their taxes to help repay the debt that was incurred in making these wage subsidy payments,’’ Nelson said.
Nelson wants all recipients to provide evidence of eligibility as well as of compliance with their post-payment obligations.
‘‘In the two years since the wage subsidy scheme was introduced, there has been a huge transfer of wealth to businesses which did not experience the drop in revenue they anticipated,’’ Nelson said. ‘‘The fact over $750 million has voluntarily been repaid is a good indication that many times more would be repaid if recipients were asked.’’