Big profits on back of big wage subsidies: Call for businesses to return Covid money

Wednesday, 23 September 2020

Businesses which incorrectly accessed the wage subsidy could face criminal prosecutions.

Big businesses that have turned a profit this year despite the impact of Covid-19 should pay back the wage subsidy they received from the Government, one commentator says.

The scheme was launched in March to help New Zealand businesses navigate the impact of lockdown. The original tranche of the subsidy required a business to have a revenue fall of 30 per cent year-on-year due to Covid.

The scheme was successful in getting money to businesses quickly. In the week ended September 11, $13.9 billion had been paid out through 756,649 applications. The majority of New Zealand jobs have been supported by the wage subsidy at one point.

But while businesses are required to pay back the money if it turns out that they did not meet the revenue drop criteria, there are calls for some big businesses recording profits this financial year, particularly those sending dividends to shareholders, to pay theirs back too.

* Good, bad, ugly of Covid response: Did we line rich pockets?

* Businesses repay hundreds of millions of dollars in wage subsidies

So far, $442.3 million has been paid back.

Harvey Norman’s fortunes have soared post-lockdown.

Some that have raised eyebrows include Harvey Norman, which reported a year-on-year increase in profits of almost 20 per cent and a lift in New Zealand sales of more than 28 per cent. For July and August, profits were up 185.8 per cent, Australian shareholders were told.

Another is Briscoe Group, which reported a barely-dented $27.9m profit this year and paid out a 9-cent per share dividend to shareholders, up from last year’s 8c.

Harvey Norman received $12.7m in the wage subsidy and Briscoe Group more than $11m across its businesses.

Michael Gousmett, an adjunct fellow in the school of humanities at Canterbury University who also acts as a consultant for charity and not-for-profit organisations, has been critical of what he sees as misuse of the scheme.

He said the subsidy scheme was intended to support businesses that were struggling and those that had made a profit should pay it back.

He said, as a Briscoe Group shareholder, he expected the subsidy to be returned. “I do not want to be subsidised by the taxpayer in any dividend I might receive because of the wage subsidy.”

It has been suggested that businesses are simply doing what is right for their shareholders, as they are required to do. But Gousmett said these were not normal times, and it was a question of integrity and fairness.

He said the issue was about a greater sum of money than simply the amount given to the businesses in the wage subsidy.

“It is all very well to talk about the amount given as a subsidy but let’s think about the extended cost to the taxpayer over time for the amount of money the Government has to borrow to pay the subsidy in the first place, which they are now sitting on.”

Briscoe Group managing director Rod Duke said he did not want to comment. Harvey Norman did not respond.

George Van Ooyen, group general manager of client service support at the Ministry of Social Development, said businesses were entitled to the subsidy if they met the criteria.

“Employers make a formal declaration at the time they apply for the subsidy. They are responsible for paying back any amount received that they are not entitled to, and also notified that they may be subject to civil proceedings for the recovery of any amount received that they are not entitled to.”