BUSINESS

Tax deposit cut to be based on gross revenues

PROKOPIS HATZINIKOLAOU

TAGS: Finance

Gross company revenues in the period from March to May will determine the percentage of the corporate tax deposit reduction and the number of firms to benefit from the relief measure.

Sources say that based on data collected by the Finance Ministry, almost all enterprises hurt by the coronavirus measures have posted a contraction of gross revenue of more than 20% from the same period last year, which is likely to continue for most firms up to the end of 2020.

The reduction rate of gross revenues will be the key factor, as it will determine how many enterprises benefit from the planned tax deposit cut, as well as the extent of that cut. If the corporations standing to benefit from the measure are too numerous for state coffers, the tax deposit cut will not reach up to 50%, but will be around 30% instead.

Kathimerini understands that the ministry is examining the corporate tax deposit to drop either to 70% or to 50% of next year’s projected revenues. If it is halved, the state stands to miss out on 800 million to 1 billion euros, while if the reduction is only by 30% state losses will be around €500 million.

Ministry officials argue that according to current fiscal conditions the government can afford losses of up to €1 billion.

They note that “it would be irrational to ask corporations to prepay their tax based on last year’s profits, as next year, when the figures of 2020 are processed, that cash would have to be returned to them anyway,” thereby reducing the state budget revenues of next year.

The ministry’s blueprint on the matter provides for a horizontal reduction rate to the corporate tax deposit, and not one depending on the gross revenue reduction for each individual corporation or for each sector. However, sources speak of a 20% threshold in gross revenue losses for an enterprise to benefit from the deposit cut.

In fact companies may already demand a corporate tax deposit reduction if their takings are reduced by over 25%, according to the existing legal framework. However, that process is particularly time-consuming and only applies under certain conditions.

Ministry data show that the corporate tax deposit paid every year adds up to some €2.4 billion.

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