A recent study by economists at the Central Planning Bureau (CPB) suggests that Dutch businesses may have wrongly claimed hundreds of millions of euros in government wage support during the early months of the Covid-19 pandemic. The research indicates that many companies overstated their losses to qualify for or maximize support under the NOW scheme.

The NOW scheme, a major Covid-era subsidy, was designed to help employers retain staff during lockdowns. Under the scheme, companies could receive government support to cover wage bills if they expected a revenue drop of at least 20%. Nearly 30% of businesses with two or more employees applied for the subsidy. In total, the 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, amounting to €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. The findings revealed 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 this pattern holds across the entire first round of NOW support, the total excess paid out could reach around €740 million. The researchers describe this pattern as evidence of “fraud or strategic behavior.” They suggest that companies may have manipulated their revenue – either legally or illegally – to ensure they stayed just above the 20% loss threshold.

According to the researchers, there was a clear financial incentive for companies to inflate their losses. 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 noted that the speed with which the NOW scheme was launched made the system vulnerable to abuse.

The UWV benefits agency, which administered the scheme, is still reviewing declarations and recovering overpaid subsidies from companies where necessary. Around 35% of Dutch companies utilized 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, heavily impacted by lockdowns, were most likely to do so.

In 2021, the CPB estimated that 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%. Despite the potential for abuse, the researchers emphasized that their findings do not necessarily mean the NOW scheme was ineffective overall.