Will The House Pass the COVID Tax Cut Bill?
January 14, 2021
First published on CyprusBusinessReport.com
Amid widespread financial distress in the COVID-19 pandemic, the Cabinet approved a 70 percent cut in rents for businesses for January and February.
Truth is, most businesses which are closed due to the lockdown don’t have the cash flow to pay their rent in any case.
The rents will not be written off but have to be paid back by February 2022.
If a business is located within a property owned by the state, the temporary discount is 100 percent.
Tax credits and a suspension of defense contributions will be available to landlords who discount rents up to 50 percent during the pandemic.
More support
At the same time, the European Commission approved 86.6 million Euros to support the Cypriot tourism sector.
Package travel organisers, hotels and car rental companies affected by the coronavirus pandemic now have public guarantees for credit notes issued to consumers, organisers and other services.
The credit notes apply to cancelled services booked before October 31, 2020.
The money was approved under the serious disturbance rules for member states. This allows for EU funds to be used for the real economy.
Economy on its knees
In addition to the tourism sector, the wider hospitality sector is on its knees. In the last nine months there were hundreds of event cancellations.
Musicians, florists, caterers, beverage suppliers, wedding gown sellers, party favour suppliers and other services lose untold amounts of income.
About the only businesses which appear to be benefiting for the moment are the grocery shops, home entertainment, takeaway/deliveries and pharmacies.
Political obstacles
The rent bill has to pass the House of Representatives. It’s unlikely to succeed without a fight because the budget hasn’t even been passed. The House and Cabinet are moving further away from each other after the passports for investment corruption scandal.
If the real economy is not supported immediately, we can expect a serious medium-term deterioration in government tax revenues, increasing the risk to the state’s capacity to repay its bonds.
A recent bill suspending bank foreclosures during the pandemic is helpful for the time being but doesn’t fix the long-term outlook for the banking sector. The island’s two biggest banks are taking over properties as fast as they can get court orders against hapless consumers. The problem with this is that the banking sector threatens to grow beyond the point of sustainability.
The Eurogroup made their point in 2013 that the banking sector should not be bloated and be a burden on the economy.
