ECONOMY

Tax deposit cut for 2021, too

tax-deposit-cut-for-2021-too

The Finance Ministry is examining the scenario of permanently establishing the mechanism for the calculation of the corporate income tax deposit, introduced this year due to the pandemic, ahead of drafting the 2021 state budget. Next year that would allow enterprises to avoid what amounts to interest-free lending to the state through taxes that they needn’t pay.

Either way, the budget provision for revenues from corporate taxation takings in 2021 will be significantly reduced due to the shrinking of the taxable volume – i.e. the earnings made during 2020 to be reflected in the 2021 declarations.

Making the mechanism through which the tax deposit rate is calculated for companies and self-employed professionals permanent will not have a significant fiscal cost. On the contrary, it can assist the budget of 2022, a year when the fiscal result will play a more important role than next year’s, given that the Brussels-approved fiscal easing will continue in 2021, though that is not at all certain for 2022.

This year’s deposit reduction has placed all the burden on the 2020 budget – a huge burden given the data the Independent Authority for Public Revenue published on Friday: Companies and the self-employed will this year have to pay a deposit of 1.826 billion euros, compared to €3.349 billion in 2019.

Next year the corporate income tax will be calculated on a significantly reduced basis as the pandemic will lower the amount of declared profits. There will also be the issue of the significantly reduced deposit paid this year ahead of 2021, which is deducted from next year’s tax dues.

The maintenance of the reduced tax deposit rates for 2021, at least for the corporations that will continue to see lower revenues next year too, will give enterprises some time to postpone their heavier tax obligations until 2022, thereby strengthening their liquidity for 2021, as has been the case for 2020. Having sufficient cash flow next year is seen as essential to fund the necessary growth.