Whilst many businesses are suffering drastic reductions in their operations, some businesses are struggling to operate because everyone will be effected either directly or indirectly from the COVID-19 pandemic. It is a fact now that business will slow down, so ideally the Maltese government gives measures across the board.
This is a call on the government so that in these extraordinary times, ease the burdens by freeing cash flows. Furthermore, if certain specific measures are given they will be difficult to implement in a short-time, they will be time-consuming, and expensive to implement on IT systems and will create grey areas of whether certain businesses are entitled or not. Calling 144 to be asked to call the following week will make every business owner more confused.
The social distancing lockdown can take months to get back to a situation of normality, and it will take months until the man in the street is yet again comfortable to go out and socialise. Consumers will be afraid to eat in restaurants or to go to shops where there is direct contact and constant interaction. It can take a few months until all this is over, it can take many months to a few years till the economy is back swinging at full throttle.
So here are some short term measures to benefit cash flows that can give an instant cash flow boost.
National Insurance – Employers to get April and May 2020 free of charge; vouchers in the form of credits receipts to be used in 2021 (or later this year). Therefore, the employer submits FS5s normally, however, to be eligible they need to have everything up to date, including old arrears. The voucher will be on SSC only.
Micro Invest – Consider renewing current unutilized certificates by a further two years, since businesses who invested might turn into a loss this year so that way you do not make them lose the benefit of time.
Rent-free months – Suggest a legal notice that landlords are obliged by law to give X free months or X% discount on rent to businesses, in commercial leases. This will be very unpopular but can save many businesses. In this scenario then the government must give something back to landlords, such as a tax break for 2020 or a reduction in taxes. Similarly, the same can be done for home rents. This measure is to be coupled with the bank moratorium measure in the next point.
Banks – Ask banks to give a 3 or 6-month moratorium on loans, with zero interest charges to the customers be it on business loans or personal loans and pass the interest charges to the government to have them paid from the kitty that has been collected such as the IIP money.
VAT – There is no point to reduce VAT, if shops are closed they will not collect VAT. At this stage the focus has to be to save jobs, and return to normality. In reality, Malta will still be in full employment, because foreigners who have no jobs will move back to their countries.
Corporation taxes – There is no point in changing this because if the businesses remain shut for a number of months, they will not declare any profits.
Personal taxes – Tax breaks, in the form of tax refunds. There is no need to change the tax bands, however there should be tax rebates of for e.g. €500 for those earning up to €15,000; €1,000 for those earning up to €20,000; €1,500 for those earnings up to €25,000. But this not in the form of credit, but rather the employer calculates to collect less PAYE. For example, a single person earning €18,000 has to pay €1,685 in tax in a year. The employer deducts only €685. When they compute the tax return the following year they will have to pay €1,685 less €1,000 one-time rebate. This effect can be very effective as it literally gives a tax break with immediate positive consequences for the low-income earners. For those earning over €25,000 the tax break amount remains the same.
At the moment the monetary cost of each impact is irrelevant on the government’s finances because Malta has a good solid economic fundamentals and so can afford to have deficits for the sake of steering off the country from a deep depression.
For more information, get in touch directly with Dr Adrian Sciberras, FCCA, MIA, CPA, LL.B.(Hons), M.Adv (Melit.) on email@example.com.