Dutch businesses may have wrongly claimed hundreds of millions of euros in government wage support during the early months of the Covid pandemic, according to new research by economists at the Central Planning Bureau (CPB).
The findings, published in economics journal ESB on Thursday, suggest that many companies overstated their losses to qualify for or maximise support under the NOW scheme — a major Covid-era subsidy designed to help employers retain staff during lockdowns.
Under the scheme, companies could receive government support to cover wage bills if they expected a drop in revenue of at least 20%. Nearly 30% of businesses with two or more employees applied. In total, benefits agency UWV paid out close to €24 billion to support salary bills during the pandemic.
The CPB researchers examined a sample of businesses that received support in the first round of the scheme, worth €5.2 billion. They compared self-reported revenue loss figures submitted to the UWV with the companies’ actual turnover, as reported in VAT declarations for the same period.
They found that nearly 40% of businesses in the sample reported greater losses to the UWV than they declared in their tax returns. Among those companies, the overpayment averaged €8,000 each. If that pattern holds across the entire first round of NOW support, the total excess paid out could reach around €740 million.
The researchers describe the pattern as evidence of “fraud or strategic behaviour”. Companies may have manipulated their revenue — either legally, by adjusting opening hours or launching promotions, or illegally, by delaying or concealing turnover — to ensure they stayed just above the 20% loss threshold, they said.
“There was a clear financial incentive,” the researchers wrote. Companies that failed to meet the minimum loss threshold risked having to repay their entire advance. Reporting a slightly greater loss also meant receiving a larger subsidy.
The researchers stressed that their findings do not mean the NOW scheme was ineffective but say the speed with which it was launched meant the system was vulnerable to abuse.
The UWV benefits agency, which administered the scheme, is still in the process of reviewing declarations and recovering overpaid subsidies from companies where necessary.
About 35% of Dutch companies used at least one of the four main measures – tax deferral, NOW wage subsidy, TVL fixed tax subsidy, or Tozo income support. The hospitality industry and cultural institutions, both of which were impacted by the lockdown, were most likely to do so.
The CPB said in 2021 up to 180,000 jobs could have been lost if businesses had not received help to pay wages and costs while they were unable to trade, while the economy would have shrunk by a further 0.6%.