As most of you know, I am an accountant, looking after businesses of all shapes and sizes – from building firms to contractors, to hairdressers and beauticians, to commercial electrical companies. Each type of business has its own peculiar conditions, but they all have a number of things in common. When we went into lockdown last year, I was worried about most of them. Some had contracts signed; although completion of the work would be delayed, it would still go ahead. Some, such as the personal services industry, would lose a chunk of their income permanently because even loyal customers don’t come back for the haircut or facial that they missed during lockdown. Whichever way you looked at it, every single business had reduced turnover for the lockdown period – at least at Level 4, which was 4 weeks last year – because even if they recovered the lost revenue over the following weeks, a month’s worth of income was pushed out and would only be recovered, if ever, over time.
But imagine my surprise when I was looking at the GST returns in June 2020 and the provisional tax payments in August 2020 for many of my clients, and the tax payments were the same as before – higher in some cases. While I admit that my experience is anecdotal, nothing alters the fact that the expected drop in revenue and the corresponding drop in tax revenue last year just didn’t happen. Business really did bounce back from the first lockdown, and tax revenue was preserved as a consequence.
My curiosity got the better of me on this and I did some research. It turned out that there were a number of factors at play in 2020. Lockdowns were a very new experience, and brought out the generous Kiwi spirit that we all love and appreciate. People paid in advance for their haircuts. Some just made donations to their favorite businesses, or bought more merchandise than usual, to help the businesses survive. The construction sector hardly missed a beat but came roaring back as soon as Level 3 was announced. Hospitality still struggled until Level 2, but regular customers supported their businesses by buying takeaways and using ‘click and collect’. Landlords gave commercial tenants rent-free periods. Retail businesses sold record amounts of goods online. It was a genuine surprise to find that businesses that might have gone to the wall during lockdowns were now being criticised for taking the wage subsidy when their profits ended up higher than usual. No one knew that was going to happen in March when the lockdowns hit; it was more of a delightful surprise when it was business as usual – more than usual – once lockdowns were over.
So I am now going through the same process for the August/September 2021 GST period, and the provisional tax payments due in October. I thought it would be interesting to do a comparison between the two lockdowns. Please bear in mind that I have few Auckland-based clients, so all of the clients I am talking about are based outside of Auckland and the Waikato. Most are Wellington and Wairarapa based, with some in the South Island.
The first thing that has struck me this time is the enormous amount of money businesses have received in government handouts. Don’t get me wrong; I have encouraged every business to apply for them if possible. We were in lockdowns Level 3 and 4 for 7 weeks last year. This year, apart from Auckland, we were in lockdowns Levels 4 and 3 for a total of 3 weeks. Furthermore, when you consider that the entire South Island should not have been in lockdown at all, the combination of the loss of earnings, the waste of perishable stock and the unnecessary government handouts, giving support to businesses that should not have needed it, forms a colossal waste of money. The unnecessary handouts were then added to lost tax revenue for the income that should have been generated during that 3-week period, but was lost.
The second thing is… without exception, everyone’s GST payments are down this time. Some are half what they would normally be. Sure, losing 3 weeks out of approximately 8 in a government-enforced lockdown should have a detrimental effect on cashflow, but it is much worse this time around. There has not been the immediate bounce-back that happened last year.
There could be a number of reasons for this. Lockdown fatigue is the obvious one. This is not a new experience now, but rather a rinse and repeat of a tedious farce. Others may be more subtle. Last year, when we came down to Level 2, there were no masks. There were queues everywhere, with people social distancing, but no masks. The mask is a constant reminder of the constraints we are under. Every time you go to the supermarket, you are reminded of the virus. Everyone is forced to wear an outward sign that we all live in fear. Ridiculous rules like having to wear a mask to enter a restaurant, then removing it once seated, are a constant reminder of the siege mentality that we all face. There is no escaping it, even when you go out for an evening in a place that had not had a single COVID case, ever.
We are cowed. We bow to the government’s ‘superior’ wisdom. Instead of a rallying cry, these days, it is a cry of bored resignation. Last year, we all tried to support local businesses. This year, the constant reminders of the world we live in make you want to hide under the bedcovers and never come out.
So while Grant Robertson tells us all, jolly as ever, that the economy is still going gangbusters, my anecdotal evidence tells me otherwise. Yes, I believe the construction industry and related trades are still going at breakneck speed, but I’m not so sure about everyone else, post lockdown.
Of course, this does not take into account the devastating effects on tax revenue caused by the Auckland and Waikato lockdowns. I have no direct evidence of this, but the combination of government handouts and lost tax revenue from the extended lockdowns there can only be described as eye-watering.
One thing is for sure. The combination of weeks and weeks of handouts, together with unnecessary government handouts for some areas, and a reduced tax take in August/September, is bound to have an effect on the government coffers. I suspect that Robertson will lose his jolly demeanour very soon.
In the meantime, I deplore the dreadful waste of government funds, borrowed to support the lockdowns, which could have been spent on an improved health system, better infrastructure and the recruitment of much needed skilled staff from overseas. But the money has been spent now. Fear has deprived us all.
Look forward to a grim future, Kiwis. All socialist governments spend like there is no tomorrow. This one, however, has broken all records. There will be no money for anything very soon… and it didn’t need to be this way.
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