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Lockdown losses: How are world economies dealing with downturn?

Author : 112.ua News Agency

Source : 112 Ukraine

Compared to the spring lockdown and restrictions in other countries, the quarantine in Ukraine might seem to be quite weak. Shops, beauty salons, cafes, and restaurants are not closed (except for weekends), transport continues to operate, and no one monitors the movement of citizens.
10:00, 30 November 2020

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But why even such light and short-lived (from November 14 to 30) restrictions angered representatives of small and medium-sized businesses and entrepreneurs, representatives of the creative sphere, restaurant and hotel business constantly come out to rally under the Cabinet of Ministers? Protesters said that when they lost the bulk of their weekend earnings, they still had to pay taxes, wages, and rent, which would have led to their closure.

For example, Dmytro Derkach, co-founder of the Planeta Kino cinema network, said on Facebook that all cinemas would probably have to be closed.

"... no compensation, tax holidays, interest-free loans, assistance to employees of closed companies. Cinemas receive up to 80% of their income on weekends. On weekdays, people do not go to the cinema, they actively ride in crowds in public transport. we will probably have to close all our cinemas and lay off 500 employees. People are left without jobs and salaries... We have much safer public transport, which will continue to overflow on weekdays," Derkach claimed.

Related: Ukrainians to be informed about lockdown in 7-10 days

Prime Minister Denys Shmygal announced on November 25 that the entrepreneurs will get some help and the plan "has already been developed." This is better than nothing, but the weekend quarantine is almost complete and the artistic epithet for such a description of the mind-blowing speed would be best chosen by perhaps Les Podereviansky. Also, President Zelensky spoke about the need for financial assistance.

How do they help entrepreneurs in Ukraine now, what financial concessions is the government going to make, and also how do they compensate business losses due to quarantine in other countries? Understanding.

Current help

So, let's remember how state aid began from the very beginning of the pandemic. On March 17, the Verkhovna Rada introduced partial tax holidays and a moratorium on inspections. All individual entrepreneurs (IE) were exempted from paying the unified social tax (ERT). Fines for violation of tax legislation were not applied, the deadline for filing an annual declaration of property and income was extended, non-residential real estate was not taxed on real estate. After the abolition of strict quarantine in Ukraine, the payment of taxes resumed.

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The second point is the government's program "Available loans 5-7-9%," it is still in effect. The program was constantly changed – in March, May, June, the conditions and the list of reasons for granting a loan were expanded.

Related: Introduction of total lockdown can reduce Covid-19 incidence to zero, - official

October 9, the Cabinet of Ministers changed the procedure for providing state support to microentrepreneurship and small businesses. The changes relate to the liberalization of a number of requirements for business entities in terms of increasing the maximum level of their annual income to the equivalent of 10 million euros and eliminating the requirement for profitability. These changes to the program were adopted as part of the government's order to develop and approve a program of financial support for small and medium-sized businesses, as well as cultural entities, creative industries, tourism, whose activities are under the influence of the restrictions imposed due to Covid-19.

"The program has already shown its effectiveness in crisis conditions. After all, as statistics show, more than 70% of hryvnia loans that were issued by banks from February to August this year were issued within the framework of the Available loans 5-7-9% program," said Finance Minister Serhiy Marchenko.

Local initiatives

Local authorities tried to resist the introduction of weekend quarantine.

Lviv city, Western Ukraine
112 Agency

In Lviv, the authorities canceled the weekend until November 30 for catering establishments, shopping and entertainment centers, cultural institutions, gyms, fitness centers and markets.

In Uzhgorod, the city council decided to exempt entrepreneurs of I and II payer groups from taxes (they are prohibited from working on Saturday and Sunday because of the weekend quarantine). Abolished the payment of the single tax, land tax, and lease of communal property. Small and medium businesses may not pay taxes until the end of December.

Related: President’s Office announces terms of introduction of lockdown in Ukraine

Feedback from business

The situation requires more effective measures, - this statement was made today by the Ukrainian Business Council. It is proposed to develop criteria of sanitary standards for trade and to close down enterprises that do not adhere to them.

The government and parliament urged to compensate for the negative impact of the weekend lockdown:

  • credit holidays for business;
  • tax holidays for the payment of ERUs for individual entrepreneurs, cultural institutions, and a number of other categories of enterprises;
  • reimbursement of expenses of enterprises that fall under the weekend quarantine for salary taxes and fees;
  • compensation for employers' expenses for testing employees;
  • holidays for paying taxes on land and real estate for the 4th quarter of 2020.

Individual entrepreneur assistance and salary compensation. While in the form of an announcement and bills

In the last week, the Cabinet of Ministers and the President came up with initiatives that should compensate for the impact of quarantine on business. So far, however, it seems that the plan is to confuse for a while and give time to read the text in small print. And that's why:

Related: Christmas spirit amid pandemic: How Europe to ease lockdown for holidays season

Two options for business support

On November 25, the Verkhovna Rada registered two bills No. 4421 and No. 4423 on business support during the quarantine.

Unian

Bill 4421 proposes to extend the moratorium on checks during quarantine; cancel the military duty for three months; establish a moratorium on changes in VAT rates for a year; for restaurants, cafes, shops, shopping malls, gyms, swimming pools to reduce the ERU tax (up to 11%) for three months, release from liability for non-fulfillment of economic obligations, renew the license for retail trade in alcohol and tobacco products.

Bill No. 4423 proposes to exempt FLP and persons engaged in independent professional activities from December 1 to 31, 2020 and from January 1 to January 31, 2021; the right of local governments in 2021 to amend local taxes and fees to reduce the rates of the single tax and/or payment for land and/or tax on immovable property owned by individuals or legal entities.

If adopted, they will enter into force the next day after publication. (!) But these bills are not the authorship of the Cabinet.

Cabinet of Ministers

And the Cabinet, in turn, also spoke about the preparation of a bill to support the business. Prime Minister Denys Shmygal said that the government, at the initiative of President Zelensky, has already developed programs in case (!) If quarantine in Ukraine is intensified.

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Cabinet’s suggestion:

  • Assistance to private entrepreneurs and employees, whose sphere may be subject to closure due to quarantine. Employees and sole proprietors will be able to receive assistance in the amount of UAH 8 thousand.
  • More than a million Ukrainians will be able to use the help, the state will allocate UAH 10 billion for this.
  • Employers will also be able to receive up to UAH 8 thousand of one-time assistance for each employee whose working hours are reduced as a result of quarantine.

Businesses that have stopped working will receive compensation for the costs of paying ERUs for employees.

Almost 200,000 individual entrepreneurs will be exempted from taxes and fees, including ERUs

Related: Ukraine not to introduce total lockdown next week,- Healthcare Minister

According to the head of government, these programs will be sent for consideration to the Rada.

It will be possible to get 280 USD of aid to private entrepreneurs and employees from the state in 5 minutes in the "Diya" application. There are also a number of conditions and a list of areas of activity.

- On November 25, at a meeting, the Cabinet of Ministers approved the resolution "Some Issues of Payment of Social Assistance for Children to Individual Entrepreneurs". So far, the text of the decree has not been published, and assistance will begin to be paid only after the entry into force of the corresponding decree.

Thus, the government resumed payments of assistance to children of FLP groups I and II, who had already received such assistance in May-August. In December, FLPs will receive assistance for November-December without submitting a new application.

Individual entrepreneurs who apply before December 15 will also provide such assistance.

Paying off the tax debt

President Zelenskyy said that for almost 4 million Ukrainians, tax debt of up to 105 USD will also be canceled.

Official website of the President of Ukraine

Another two bills of president Zelensky

On Thursday evening, Zelenskyy submitted to the Verkhovna Rada two bills on business support during quarantine – No. 4429 and No. 4430. In total, there are 4 different bills in the Rada regarding assistance to business, and this is only two days.

At the moment, the texts of the draft laws are not available. The President identified these bills as urgent.

Related: No prerequisites for immediate introduction of lockdown in Ukraine, - Arakhamia

How other countries facilitate their business

Germany began helping entrepreneurs back in the spring, DW reports. Since March, the affected micro-enterprises and self-employed have received free payments of 9-15,000 euros and compensation of 67% for part-time work. There were also concessional loans to larger firms.

www.dw.com

In November, the country introduced a second lockdown. On the eve of the quarantine, protests were held by representatives of the creative industry and the restaurant business, which are losing revenue as a result of restrictions.

The state has prepared a second aid package and allocated 10 billion euros per month for this:

  • companies forced to suspend work with less than 50 employees and self-employed, the state will provide free assistance in the amount of up to 75% of their monthly income;
  • the calculation of compensation is based on revenue in November 2019. November is the pre-Christmas month and, together with December, provides shops and catering establishments with the largest revenue of the year;
  • preferential express loans from the state bank KfW to enterprises with less than 10 employees;
  • lending to larger companies.

On November 25, Germany extended the lockdown until at least December 20. According to the law, lockdown should not be administered for more than 4 weeks. They must be renewed each time. In addition, the country will make a "lockdown break" for a week to allow families to celebrate Christmas. The extension of the quarantine means that they will continue to provide assistance to entrepreneurs.

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The UK has long since introduced the Furlough program in response to the coronavirus pandemic. This is something like a forced leave, only the state pays an employee of the company 80% of the salary with a maximum of 2500 pounds sterling per month. The employer only covers pension taxes and government insurance contributions.

Fotolia.com

This scheme pays a portion of the wages to people who cannot do their job because their workplace is closed or they no longer have enough work. They may also be unable to work because the family needs care for the sick or the children.

The system works like this: the employer asks the employee to contact Furlough, he can agree and submit an online application on his own behalf (no paper statements and a trip for signatures-seals are needed in a pandemic). All changes to the contract are discussed. The agreement must be consistent with employment, equality, and discrimination laws.

Since March, the terms of the program have changed: at first, the employer did not have the right to ask an employee who is located at Furlough to work. Then they came up with different options:

  • full forced to leave (without the right to ask to work with the preservation of 80% of the salary paid by the state);
  • part-time work - the employer is required to keep a record of how many hours employees work and how many hours they are absent. The state pays for the "weaned" hours, and the employer cannot ask to do the job.

While at Furlough, an employee may take part in training, volunteer for another employer or organization, or work for another employer.

Furlough has been renewed from November 1, 2020, to January 31, 2021.

The coronavirus has hit the UK economy, with the national debt at 19% of the size of the economy this year, a peacetime record (there has never been more debt since World War II).

Related: Police arrest over 150 during anti-lockdown protests in London

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Romania

Germany and the UK are wealthy countries, but let's see what happens in Ukraine's closest neighbors.

Along with the introduction of a second lockdown and curfew, the Romanian government has developed a financial assistance program. The entrepreneurs were given tax holidays, and the employees will be paid two-thirds of their salaries from the state budget.

Poland. The neighboring country has imposed a full lockdown, and the government has developed two aid programs: Financial Shield and the Anti-Crisis Shield. During the new wave of coronavirus, the Polish government will cover up to 70% of the costs of small and medium-sized enterprises (rent if income fell by more than 30%). There is joint financing of leasing in the transport sector, assistance in business restructuring, and teachers will receive more than 100 euros for equipment for distance learning.

 

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