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The pandemic caused a health, social and economic shock, with wide-ranging and far-reaching consequences. Economies are reeling, the outcome is uncertain. However, the government has a coherent, comprehensive, dynamic plan for the economy, health, employment, strengthening liquidity, boosting social cohesion, Finance Minister Christos Staikouras said in a statement on measures to support workers and businesses affected by the pandemic.
As he said, the plan unfolded in 4 phases: the first was in March and April. The second now, the third from June to October, when a gradual recovery of the economy is expected. And the fourth from the autumn, subject to a positive response to the pandemic, when a recovery of the economy is expected, starting from where the coronavirus found it. According to Mr Staikouras, "as the economy stabilises and recovers, we will have more opportunities to launch policies with more permanent features. Coherent policies, for example, in the fields of the green economy, extroversion, innovation and technology, which will be included in our Strategic Plan for the Development of the Economy".
According to the Finance Minister, the current third phase will be based on 4 pillars: continued and expanded employment; more liquidity for businesses; targeted tax measures; and tackling private debt.
During this period, 15 policy-specific facilitation measures, at a total cost of €24 billion, are foreseen to come into effect from the week after next and until 30 October - including the reduction until 31 October of VAT on transport, coffee and non-alcoholic beverages, as well as a tourism package.
As the Finance Minister said, the total cost of the measures currently in place or to be implemented amounts to around €14.5 billion and their added value to €20 billion. While, with the use of European funds (SURE, European Investment Bank, European Recovery Fund, etc.) in the coming period, the total cost of the measures is estimated at €24 billion.
More specifically, the following were announced:
- The right to suspend workers' employment contracts, special-purpose compensation and coverage of their insurance contributions is extended for an even longer period. The possibility of suspending the employment contract, up to 100%, of workers in the tourism, catering, transport, culture and sports sectors is continued.
- A new mechanism to support short-term employment is created to preserve jobs and support entrepreneurship.
- Unemployment benefit is granted to seasonal workers who will not be recruited in the current tourist season. At the same time, a subsidy is provided for part-time seasonal workers.
- The possibility to suspend payment of instalments of established debts to the tax authority is given to those businesses that remain closed, as well as in the tourism, catering, transport, culture and sports sectors, also for the month of June. Workers whose contracts are under temporary suspension shall have the right to defer payment of instalments of established debts.
- The possibility of a 40% rent reduction is extended in June to businesses that remain closed and to businesses in the tourism, catering, transport, culture and sports sectors. In addition, businesses that opened in May, including retailers, are given the same opportunity. In addition, businesses in the tourism, transport, culture and sports sectors are also given the possibility of rent reductions in July and August. Finally, all workers whose employment contracts are under temporary suspension are also entitled to a rent reduction for their first residence and the student residence of their dependants.
- For landlords who lease property to affected businesses and employees, the deadlines for payment of established debts are suspendedAlso, for these owners, the possibility of offsetting part of their lost income against tax liabilities after July is provided for.
- A 2nd repayable advance is granted, based on the loss of turnover for the months of March, April and May. The unallocated balance of the first phase, which has just been completed, will be added to the second phase, to bring the total amount allocated by the end of June to €2 billion.
- A reduction in the advance payment of tax is foreseen. For businesses that will experience a cumulative decrease in turnover in March, April and May of more than one percent, there will be a one percent reduction in the advance tax they are required to pay in 2020 for 2021. The percentage will be determined in July, based on the turnover data submitted by businesses for the previous period.
- VAT on transport is reduced from 24% to 13% for the period 1 June - 31 October 2020. It covers passenger transport by train, metro and tram, urban and intercity buses, airplane, ship, combined transport. Citizens, especially the weakest income groups, will benefit particularly from this state provision.
- VAT on coffee and non-alcoholic beverages is reduced from 24% to 13% for the period 1 June - 31 October 2020.
- VAT on the tourist package is reduced from 80/20 (80% with 13% and 20% with 24%) to 90/10 for the period 1 June - 31 October 2020.
- VAT on cinema tickets is reduced from 24% to 13% for the period 1 June - 31 October 2020.
- Scientific and technological research expenditure is deductible from the gross income of businesses plus 100%, compared to 30% currently, for expenditure incurred from 1 September.
- A National Register of Start-ups is created, in line with international standards, to provide a coherent framework for the development of targeted ecosystem support policies. Incentives are given to individuals who contribute angel investors for start-ups, in the form of tax credits on the amount invested.
- A programme is being launched in which the State will subsidise, for a certain period of time, a significant part of the monthly instalments of those affected by the effects of the coronavirus, who have mortgages on their first home. It covers all "red loans", both those created before the end of 2018 and those that have arisen subsequently - until today - for citizens affected by the consequences of the health crisis. It also covers the serviced loans of citizens affected by the pandemic. At the same time, it puts safeguards in place to prevent strategic defaulters from benefiting from the subsidy.
With the new programme, according to Mr.Staikouras, in addition to the extension of the existing framework:
- For the first time, consistent borrowers with performing loans, who have been affected by the pandemic, are supported.
- All borrowers affected by the health crisis who have a "red" loan are supported, even after the end of 2018.
- A culture of payment is cultivated.
- The risk of creating a new generation of "red" loans is reduced.
- Social cohesion is strengthened.
- Many more borrowers are covered than under the current framework.
Christos Staikouras referred to both the first two phases of the plan to tackle the crisis. As he recalled, during the first phase, in the two months of March-April, the government prioritized and took care of the protection of human life and public health. To this end, it boosted the budget of the Ministry of Health by about 275 million euros.
At the same time, through horizontal and timely interventions, it has spread a wide "safety net" over households and businesses.
- It has suspended payment of tax and insurance obligations.
- It gave tax incentives to workers and employers.
- Reduce rents to businesses, workers and students.
- It proceeded to pay special purpose compensation to employees, professionals and businesses, providing more support to the weakest economic strata.
- It granted additional unemployment benefits and supported the long-term unemployed.
In total, 2,000,000 citizens were assisted.
In the ongoing second phase, with the gradual opening of economic activity in May:
- The possibility of suspending payment of tax and social security obligations is extended to employees and employers.
- The right to suspend an employment contract, special purpose compensation and coverage of insurance contributions is extended.
- Rents continue to fall across all affected businesses.
- The payment of the "repayable advance" is completed. More than 53,000 businesses, mainly small and medium-sized enterprises, have finalised their application and to date 34,000 of them have had significant amounts of money credited to their accounts. The rest will be credited in the coming days.
At the same time, the tools of interest rate subsidies, working capital, guarantee mechanisms and the formulation of a new institutional framework for credit to small businesses are progressing, with the aim of enhancing business liquidity.
This post is purely informative and does not form part of any specialist advice. H experienced team of EPIDOSIS is always at your side to answer your questions about the latest developments.