15 Oct 2021

Wage subsidies: Serious Fraud Office probing claims of abuse

From Checkpoint, 5:40 pm on 15 October 2021

The Serious Fraud Office has started looking into businesses which may have abused the wage subsidy scheme.

New Zealand currency held fanned out in someones hand

File image. Photo: 123RF

$3.1 billion has been paid out in the latest round of subsidies.

The bill is far less than was paid out in last year's lockdowns, when many large companies were criticised for taking millions of dollars and later posting profits.

Independent tax researcher Michael Gousmett first raised the alarm about abuse of the wage subsidy scheme last year.

More than $13b was paid out, with the Ministry for Social Development (MSD) later criticised for not doing thorough enough checks on who had taken what.

Gousmett said the situation appeared to be worse than he suspected.

"If it's got to the SFO stage then clearly there's some very serious issues here to be addressed - there's a very high bar before the SFO is going to take any interest in the first place.

"So for it to have got to that, it's going to be very interesting to see who's got up to what and who's involved."

Serious Fraud Office Director Julie Read said the allegations related to multiple complex cases that had been referred to them following investigations by the Ministry of Social Development (MSD).
"We are pleased to be supporting the extensive work already being undertaken by MSD in response to abuse of the Covid-19 Wage Subsidy, by contributing the expertise of our specialist investigative teams to look into cases of a particularly challenging and complex nature."

Gousmett said the much lower wage subsidy bill from the delta outbreak showed businesses were behaving quite differently this time around.

"Behaviour has changed now that we know more about how the system operated last year and where it went wrong, so people are being more mindful of that.

"But at the end of the day, there's a lot of small businesses out there that are doing it so bad, and they are the ones who need funds paid out, not the ones who are rorting the system."

New Zealand Self-Employed and Small Business Association founder Rachel Taylor said it was tough for many people at the moment, but some were adapting.

"There's a lot of businesses that are heading online and opening up e-commerce websites or they're slightly tweaking the products and services so that they can do them with the restrictions that are placed on us," she said

While last time the wage subsidy was paid out in one lump sum, this year businesses have had to reapply every two weeks.

The first round saw $1.3b paid out, the second dropped to $900m, $600m in the third round and $200m in the fourth - a new round opened today.

The largest recipients so far have been the construction and accommodation and food services industries.

MSD said it had received just over $757m in wage subsidy repayments - both voluntary and requested.

It filed separate criminal charges against two people and said there would be more prosecutions to come.