FINANCE

Priority on fiscal caution

Horizontal measures to be scrapped for specific interventions in economic restart

priority-on-fiscal-caution

The fiscal impact of the pandemic continues to worry the Finance Ministry, which will be exercising extreme caution in how both favorable interventions at the processing of income tax declarations and support for the restart of the economy are implemented.

The ministry intends to avoid measures with an increased fiscal cost, such as the horizontal reduction of the levy for practicing certain professions that remained inactive for most of 2020. Instead, it will focus on interventions with no major effect on the sum of the income tax imposed, such as the protection of taxpayers from the arbitrary tax based on assets (“tekmiria”) and from fines related to online payment quotas.

On the corporate income tax deposit, any decisions will only be made after the amount of corporate profits has become known.

The ministry did announce on Friday the extension into 2021 of the exemption of agriculture professionals and fishermen from the professional levy, just like last year.

Overall, the government is trying to strike a balance between the expected increase of the fiscal debt and the highly likely wave of business shutdowns and subsequent rise in unemployment after the pandemic. The main idea is to adopt measures that are targeted so as to support sustainable enterprises harmed by the health crisis and not so-called “zombie” firms. To this end, several proposals are being planned on various government levels, without having reached maturity just yet.

A key priority is providing support for sustainable corporations through the supply of working capital for the coverage of tax and social security obligations. Incentives for mergers and acquisition are also being examined, according to the national recovery blueprint.

Government officials say there are sectors such as retail commerce that will operate normally once the restrictions are lifted, but must also undergo structural changes with the strengthening of e-commerce, for instance, thereby requiring adjustments.