$700 million in wage subsidies returned to Government
Wednesday, 26 May 2021
The Government has revised down the amount of money it has received in repaid wage subsidies, but says more than 20,000 refunds have been made.
More than $13 billion was paid in wage subsidies to businesses whose revenues suffered because of the Government’s Covid-19 lockdowns.
It was a “high trust” system and businesses that did not meet the revenue drop criteria were encouraged to pay it back.
A number of high-profile big businesses have done so as their profits recovered sharply after lockdown, such as The Warehouse, which repaid almost $70m.
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The number of refunds made hit 21,465 in early April. As at May 14, $708.8 million had been repaid.
But that was down from the $762.9 million the Government had previously said was repaid to March 30.
Ministry of Social Development group general manager for client services George Van Ooyen said it had identified a data entry issue with one of the figures entered for wage subsidy repayments.
“We found the discrepancy as part of checks being done as part of ongoing development of our repayments reporting system. We have done further quality assurance checks and updated the figures.”
Economist Brad Olsen, of Infometrics, said it was surprising, particularly in the context of questions raised about the stringency of subsidy audits.
He said the difference in the amount refunded – in early March the revised data has the total paid back at almost $60m less than previous estimates – was not inconsequential, although it would not make a huge difference overall.
Olsen said he did not expect to see large numbers of refunds in the future.
“By now it should be abundantly clear whether your meet the criteria for the wage subsidy or not.”
Auditor-General John Ryan has been analysing the scheme and said earlier this month it was possible that in some instances ineligible businesses might have received payments they were not entitled to.
Ryan was most critical of claims made by the ministry and the Government that payments were audited.
He said the ministry couldn’t describe what it was doing as an “audit” as it was just calling and seeking verbal confirmations from employers.
“After payment, MSD’s reviews mainly consisted of a verbal confirmation of information by employers. These reviews were described publicly as audits.
“However, audits require more evidence of compliance,” Ryan said.
Robyn Walker, a tax partner at Deloitte, said she would expect small refunds to continue to come in, but it would depend what the Government chose to do with Ryan’s report.
“One thing that was suggested was that maybe they should be seeking written confirmation from all applications that they are confident they did comply with criteria.
“That could trigger a lot of people to stop and think and make a decision on whether keeping the subsidy is the right thing to do.”
She said the initial wage subsidy rules were loose and while people who met the criteria were entitled to keep it, whether they should could be a different question.
The later iterations of the scheme, for example, required people to pay back amounts of the subsidy that were more than they would have earned.
But the original version paid out the part-time amount even if people normally earned much less.
“Going through the process the Attorney General suggested of seeking confirmation might make people think ‘I did think it was strange at the time to get $350 a week when I was doing a paper run and normally getting $20 a week but I just thought it was windfall gain to me that everyone was happy for me to keep’.”
She said more than half the wage subsidy payments, by number, had gone to sole traders, who would be taxed on it if they made a profit in the tax year.