ECONOMY

Fixed spending subsidy for firms in spring

fixed-spending-subsidy-for-firms-in-spring

The Finance Ministry will endow the subsidy program for enterprises’ fixed spending with over 400 million euros, making it a support instrument for the professionals hit hardest by the pandemic that will also undo some injustices.

The legal framework is already in place, but the fixed spending subsidy program will start after March, following the completion of the cheap state loans program.

That means the platform for covering companies’ fixed spending will open after the seventh phase of the “Deposit To Be Returned” program, aimed at covering companies’ losses from the year’s first quarter, or even after an eighth phase that may be added, depending on any restriction extensions beyond the first quarter.

The injustice that needs to be righted is the following: Unlike the Deposit To Be Returned, which assists enterprises that have suffered the biggest rate of decline in revenues, the fixed spending subsidy will assist those that had the biggest losses during the pandemic. It has been noted that enterprises which may have suffered a dramatic fall in revenues in 2020 – making them eligible for large sums through the first five phases of the cheap state loans program – may end up showing profits thanks to the significant drop in spending at the same time.

On the other hand, companies with a smaller drop in turnover may have sunk deep into losses and face sustainability issues due to the very high inflexible costs they had to cover amid the pandemic, such as rent, salaries of staff who could not go into furlough, utility bills etc.

In correcting these injustices, alongside the fixed spending subsidies, there will also be two more measures. The first will be the imposition of income tax on the companies that showed profits last year thanks to the (non-returnable) grants from the Deposit To Be Returned program, and the second will concern the criterion of granting companies the fixed spending subsidy only if they also have had a major revenue loss – probably at least 30%. For that purpose, enterprises interested in receiving the subsidy will also have to submit what would resemble an income tax declaration.

The disbursement of the subsidy to eligible enterprises is likely to start around May, in the hope of preventing bankruptcies.