FINANCE

Tax deposit cut gets shelved

Extended lockdowns have made a repeat of last year’s measure unlikely, sources say

tax-deposit-cut-gets-shelved

The government’s plan to extend the discount on the corporate tax deposit into this year appears to have fallen victim to successive lockdowns.

Finance Ministry sources say that the plan, which had been taken as a given until recently, has been taken off the table due to a shortage of fiscal space. The same sources add that if some unexpected fiscal improvement appears in the future, the measure may be revisited, but not for a couple of months. “For the time being, this is not among the measures being considered,” they say.

Alternate Finance Minister Thodoros Skylakakis, who until recently said that the measure could be extended into 2021, told Antenna TV on Wednesday that there is no room for such a reduction.

Ministry sources point out that the cost of the measure is quite high. Companies making a profit are expected to declare earnings of 2.3 billion euros for 2020, against €3.3 billion declared for 2019. This mainly concerns supermarkets and pharmacies that have prospered in the pandemic.

If a similar method as last year were to be introduced this year, with a deposit reduction of up to 100%, the losses for this year’s budget would come to around €1 billion. Given this year’s limitations, it is a cost that the budget may not be able to endure. There is still a possibility for alternative forms of support to companies that were hurt but still showed profits.

At the moment, the ministry is grappling with the possibility that the current lockdown will be extended, as every week of strict restrictions in Attica and other key regions for the economy – especially as far as retail commerce is concerned – adds €175 million euros to the budget’s costs. “We do not want to see March being entirely lost, and expect the market to do well in April,” say ministry officials.

There is some good news, however, from tax revenues over the first 20 days of February, which came close to the budget target. Online transactions over the same period were also satisfactory, attributed to the high demand in areas without a strict lockdown.