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The wage subsidy
The Ministry of Social Development overpaid $10 billion of wage subsidies and they refuse to take action to get the money back.
$10,000,000,000 Overpaid
$10,000,000,000 OF YOUR MONEY OVERPAID
The Ministry of Social Development (MSD) has overpaid $10 billion in wage subsidy money and refuses to ask businesses who wrongly retained or obtained the money to pay it back. If the money is not repaid, every taxpayer will each have to pay several thousands of dollars in taxes to pay back the debt the government has incurred.
After investigating the wage subsidy scheme for three years, The Integrity Institute has found that the huge amount of money given away has directly contributed to inflation, increasing prices and the cost of living crisis. While every day New Zealanders have struggled to make ends meet, business profitability in Aotearoa increased by 14% in the first 9 months of 2020 – directly after the first wage subsidy was claimed.
One woman’s businesses received $45 million in wage subsidy payments, despite being able to trade normally for a large portion of the weeks for which payments were made. Businesses like this one and many others not been asked pay any of the wage subsidy back, even after many have gone on to make record profits. Reserve Bank data shows that in October 2020 businesses had $22.7 billion or 24% more in the bank than in October 2019 and economists have said this was mainly due to the wage subsidy.
The Integrity Institute believes the wage subsidy scheme was flawed from the beginning. The subsidies were paid out quickly and the system was built on a high-trust model that was open to abuse. For Grant and Marilyn Nelson the answer is simple – MSD needs to get businesses who have been overpaid the wage subsidy, or who have wrongly retained it, to pay it back.
Over $750 million has been repaid voluntarily, and The Integrity Institute believes this is a good indication that more payments would be made if MSD asked recipients to do so. The way MSD has handled the wage subsidy scheme repayments is in stark contrast to how it deals with beneficiaries who are overpaid. MSD will hound beneficiaries for as little as a $20 repayment and The Integrity Institute wants to know why businesses aren’t being treated in the same way.
Grant and Marilyn Nelson are concerned New Zealanders who just want to see MSD do the right thing. If you share their concern, now is the time to take action. Sign the petition and make your voice heard.
Read more about the wage subsidy scandal
You can check out the links below to find out what happened.
Summary of ministry of social development wage subsidy failures
Its failure to clarify or include in the Declaration important objectives, requirements and conditions. Its failure to adopt established beneficiary investigation and prosecution processes and, consequently, to use lax processes...
Cabinet decisions and advice to ministers
The following are from the Cabinet Minutes on decisions made on 16 March 2020. (CAB-20-MIN-0108) COVID-19 Overview of the Government’s Response Economic Package (Refer to covid19.govt.nz for Cabinet papers) 9....
Advice on potential waste and fraud
(Refer to TREASURY OIA RESPONSE FEBRUARY 2021) ADVICE TO MINISTER OF FINANCE 21 March 2020 REGARDING REMOVING CAP OF $150,000 Description: This paper proposes options for Cabinet to: Remove the...
Stakeholders influence inappropriate
A December 2020 NZ Herald article revealed that on 2 March 2020 Business New Zealand executives had a meeting with officials and the Prime Minister and the Minister of Finance....
Treasury wanted more excessive payments to businesses
On 16 March 2020 Cabinet decided that a 30% loss of revenue for at least one month should be required. The following quotes show how officials tried hard several times...
Wage subsidy objectives not followed in Declaration
The wage subsidy was implemented to support struggling businesses to retain an attachment to employees during a Level 3 and 4 shutdown. This was the main wage subsidy objective and...
Declaration rules inadequate
The wage subsidies we are mainly concerned about are the main wage subsidy and the extension wage subsidy. Subsequent wage subsidies made some changes to the Declaration that were an...
Overpayments ignored
In 2020 the MSD paid out almost $14,000 million of wage subsidies very quickly and there was not time to do more than check a small number of the over...
Audits only desk checks and conversations
As at 4 February 2022, MSD has conducted 3,074 pre-payment checks of applications involving more than 80 employees, 4,026 pre-payment checks on integrity exceptions, 3,789 random post-payment checks, and 3,906 targeted post...
Official and business data ignored
Auditor-General’s report on management of the wage subsidy. May 2021 4.80 Inland Revenue’s work has also involved looking at whether some applicants GST on taxable supplies (the supplies that a...
Reports indicating widespread abuse ignored
The MSD knows that the wage subsidy has been subjected to abuse ranging from school children, couriers, consultants and farmers through to large businesses and an Auckland woman who received...
Failure to write to recipients
Auditor-General’s report on management of the wage subsidy. May 2021 In my view, the use of a high-trust approach at the outset needs to be balanced with adequate verification after...
Failure to prosecute
Staff instructions. July 2021 COMMENT: The MSD did not ask for advice about prosecuting so a year later had not prosecuted anyone. Auditor-General’s report on management of the wage subsidy. May...
Panel decision-making
The SOC stated in paragraph 32 that prior to the Panel being convened, MSD made no decisions about enforcement action in relation to any case. They responded by saying some...
Professional firms and real estate agents keep wage subsidy Australian experience
The Jobkeeper wage subsidy was available for 12 months to 31 March 2021. It was administered by the Australia Tax Office who had access to the past income of businesses...
Finance and expenditure committee report August 2021
In August 2021 the Finance and Expenditure Committee of Parliament reported on the wage subsidy and endorsed the criticisms and recommendations made by the Auditor-General. The following quotes and notes...
Auditor-General recomendations not properly implemented
AUDITOR-GENERAL 21 DECEMBER 2021 LETTER TO FINANCE AND EXPENDITURE COMMITTEE REGARDING PROGRESS BY MSD ON IMPLEMENTING OAG RECOMMENDATIONS. This long letter gave a rosy picture of the work being done...
Wage subsidy impacts
The Reserve Bank created $50 billion to support the economy and part of this was used for the wage subsidy but about $20 billion was overpaid. This money was used...
MSD Review and evaluation failures
SAMPLE OF 1,000 The May 2021 report by the Auditor-General on the wage subsidy stated: 4.77 As part of our 2019/20 annual audit of the Ministry of Social Development, our...
The unacceptable actions of Treasury and MSD officials
Most of the businesses and professional firms we have personal knowledge of have wrongly obtained or retained part of the wage subsidy they received. They were able to work almost...
Advice on potential waste and fraud
(Refer to TREASURY OIA RESPONSE FEBRUARY 2021) ADVICE TO MINISTER OF FINANCE 21 March 2020 REGARDING REMOVING CAP OF $150,000 Description: This paper proposes options for Cabinet to: Remove the...
Examples of widespread overpayments and abuse
Statistics show that wage subsidies were paid for more workers in some industries than the number officially recorded. Tourism and hospitality businesses were far more badly affected than other businesses...
Academic Commentators
The following have previously commented on abuse of the wage subsidy and the need for repayments to be made: Jilnaught Wong, Accounting Professor at Auckland University has made numerous comments...
