GST returns increase raises questions over wage subsidy

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