1 Oct 2020

Collins' call for wage subsidy refunds 'misguided'- Business NZ

From Checkpoint, 5:16 pm on 1 October 2020

Business New Zealand says National's plans to change legislation to allow for wage subsidy claw backs are 'misguided', and not necessary.

New Zealand currency held fanned out in someones hand

Photo: 123rf.com

Subsidy payouts have topped $14 billion and while they have kept many New Zealanders in work, they have also helped boost companies who have gone on to record large profits, or make large staff cuts.

That includes Briscoes, which claimed more than $6.5 million in wage subsidies but has since reported profits of $28m.

Speaking at last night's Newshub leaders' debate, National leader Judith Collins told moderator Patrick Gower the subsidy rules were too loose and she would make sure companies who did not need the cash paid it back.

"We may have to change a law - I would've thought we would've had a lot of support in Parliament to do that."

Labour leader Jacinda Ardern has previously criticised the behaviour of The Warehouse, which took more than $50m in wage subsidies but later announced plans to lay off hundreds of staff.

But Ardern was not  backing any retrospective law change.

"It was a moral issue - some of these companies followed the rules, they just didn't follow the spirit of fairness."

Ardern seemed surprised by National's approach - noting the opposition had been widely supportive of the subsidies, even pushing for further roll outs in Auckland's second lockdown.

She was not the only one taken aback - Council of Trade Unions economist Andrea Black said she was interested in Collins' position, given her background in tax law.

"Tax lawyers normally loathe retrospective taxation and this is effectively a form of that being proposed."

Black said it was really an issue for companies and their conscience, and did not believe a law change was appropriate.

Business New Zealand chief executive Kirk Hope agreed - he said it was short-sighted to be criticising profitable companies.

"Let's not forget that pretty much every year the corporate tax take - or the business tax take - in New Zealand is around $15 billion annually.

"It's misguided to say we don't want those businesses making money - those subsidies were passed on to their workers and we do want those companies to be viable and making money and reinvesting into their businesses so they can grow and employ people in the future."

However he said companies which broke the rules around the wage subsidy - which required a 30 percent drop in revenue - should absolutely expect to pay it back.

Today Judith Collins was taking a more measured approach - she said she was caught on the hoof last night with her law change plans, but is not backing down.

"I thought about it and I thought it's just not fair for people - wage and salary earners - to have to go and pay more taxes for longer because of people actually, frankly, rorting a system.

"Well I'd have to work out how to do it, in terms of getting the votes in Parliament - and how to do it without actually unfairly effecting those people who have acted entirely correctly."

Jacinda Ardern said she stands by the fast roll out and the high trust model was vital to save jobs.

Around $450m of wage subsidies have been repaid so far - and government spot checks are taking place into companies which took the money.

The Auditor-General is also looking into the issue - but their findings will not be known until the second half of next year.