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Wage subsidy questions raised after more than 10,000 audits

More than 10,000 companies have been audited to check they have met the rules of the government's wage subsidy programme.

Source: 1 NEWS

By RNZ reporter Nita Blake-Persen

More than $14 billion has been paid in wage subsidies, with some of the larger recipients since reporting profits and paying dividends.

That has raised questions about the eligibility requirements.

As the scheme comes to an end, latest figures show nearly 24,000 jobs are being subsidised, down from 52,000 a week before and 1.7 million since it was rolled out in March.

But the wage subsidy's bill will be felt for some time yet, and work is underway to drill into where the $14 billion dollars' worth of payments went.

The Ministry for Social Development (MSD) has completed 10,000 random and targeted audits of the nearly 760,000 businesses that received the money. There have been 844 cases referred for investigation, with 335 underway.

Victoria University tax professor Lisa Marriott told Checkpoint that is relatively low.

"I think that does need to be much higher, particularly because there are around eight per cent of those cases that are being referred onwards for some level of investigation."

She said there are grounds to look for more.

"The fact that they have got 844 cases being investigated tends to suggest that there are at least some businesses out there that perhaps are struggling to establish that they have followed the rules as they should have done."

Plenty of people are giving the money back. More than 16,000 payments have been received, with MSD requesting a total of nearly 19,000. Most of those have been initiated by businesses.

Some of the top recipients, including Mainfreight's Don Braid, said the decision to return their $10.6 million was a moral one, despite being eligible to receive the money.

"That could well be right from a monetary point of view but we would be poorer morally for doing it and it just did not sit with how we act and behave as a business, our integrity is everything, and morally it didn't sit right with us even though we qualified to receive it," he said.

The largest payback to date has been Silver Fern Farms, who returned the nearly $40m it initially claimed.

While Air New Zealand was the largest recipient of the scheme - receiving $113m - it has also paid back $3.3m it was not able to allocate under the wage subsidy rules.

It is something chief executive Greg Foran did not know about when Checkpoint asked yesterday.

On Friday the airline clarified why it has repaid money, despite being on its knees financially.

It said there was money left over from employees who left the business before the end of the 12-week period, employees who went on ACC or parental leave during the 12-week period or employees initially thought to be eligible to receive the wage subsidy but were subsequently found not to be.

Other top repayments include engineering consultant firm Beca. Managing director Darryl-Lee Wendelborn says the company gave back $15m.

"I think moral is always in there, we are always a values-based and employee-owned organisation."

Doug Johnson is the managing director of the Tonkin and Taylor Group, which returned more than $5m.

"We didn't know whether we needed it or not - our forecaster said that we would, but we did enter into the application on the basis - and we did confirm with MSD when we applied for it, that if we didn't need it we could pay it back. And that's what we did," he said.

Jilnaught Wong is a professor of accounting at Auckland University. He has criticised companies that received the subsidy and went on to pay a dividend.

"If companies are able to pay dividends, obviously they were in a cash position to do that, then they really didn't need to draw on the wage subsidy."

And he said if the subsidies were to be needed again, things would need to be different.

"If we were to do it again, I would like to see it possibly as a forgivable loan - that the government would give it to you and they would forgive it if you actually met the appropriate criteria over, say, the 12-month period, the year end or whatever it is."

As the scheme's autopsy continues, Marriott hopes that the same rigour will be applied to the companies as is applied to benefit fraud.

"We're fairly keen to pursue and investigations and prosecutions of those who engage in welfare fraud. You would hope that a similar sort of business fraud would not have an approach taken to it which was significantly lighter."

In a statement, MSD said it has 100 fraud intervention staff working in its audit team. Extra checks during audits include confirming with Inland Revenue the number of employees and reiterating the obligations contained in the employer declaration to ensure they are understood.

But independent tax researcher Michael Gousmett said he questions how effective the MSD fraud investigations are.

"To what extent are MSD actually having people investigating this, but nothing’s going on - of course my message to them is: How much has this cost so far, if there’ve been no results from this activity?"