Government to deliver generous fiscal support for businesses
View(s):The Finance Ministry is poised to implement a fiscal stimulus package focusing across the country’s businesses to weather the coronavirus storm.
The package provides tax concessions, extending deadlines for tax filing, deferral of tax payments, faster tax refunds, and some tax exemptions credit guarantees and collateral waivers, official sources said adding that these measures are under consideration to rescue COVID-19 hit corporates and SMEs.
The tax relief is in the form of an exemption of income tax, VAT, and stamp duty for short durations till the country returns to normalcy.
The Ministry has already focused special attention on extending tax relief for aggrieved government suppliers, service provider’s contractors and other firms presently idling at ministries and departments to collect dues accumulated up to millions of rupees during the past few years for their products and services.
The Treasury will be exploring the possibility of granting a tax waiver to these firms to offset their accumulated dues for unsettled claims from the government, a senior Treasury official said.
This will settle all government dues to the construction, fertiliser, pharmaceuticals, financial services and other sectors which have substantial receivables. These unpaid claims amounted to Rs.240 billion.
If the government has made a conscious decision to provide tax relief due to COVID in addition to previous tax cuts there will challenges on a revenue shortfall, tax expert N.R. Gajendran told the Business Times.
Interest rates have come down and this is expected to increase economic activity while the debt repayment situation will improve on the long run, he said.
“These revenue shortfalls have to be dealt with if not they will have to curb expenditure and large scale investment might have to be curtailed,” he added.
VAT deferrals during the first half of the year along with rescheduling of EPF and ETF dues and corporate tax rate relief for all companies for a 6-12 month period are also under consideration.
The Treasury will extend a government guarantee or loan protection insurance cover to lending banks which face the risk of default when implementing Central Bank (CB)’s refinancing facility, a senior Ministry official said.
In order to increase liquidly in the banking sector the CB has been compelled to pump Rs.300 billion by printing money into the banking sector which had excess liquidly of Rs. 200 billion at this time, Senior CB Deputy Governor Dr. Nandalal Weerasinghe disclosed. (BS)