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28-05-2020

“Recovery” operation: how can the State support the business after COVID-19

The world is beginning to transit to the post-quarantine period. Although everyone is eager to resume a normal existence, this is not a time for breathing a sigh of relief. Especially, for the business. As we have yet to experience the consequences of epidemic for the business processes by this autumn: when the enterprises that currently manage to keep a business running may face lacking in commercial activity and income.

Reduction of all possible expenditures (marketing, corporate training programs, corporate social responsibility projects), transition from annual and quarterly budget planning to weekly budget planning, revision of all the conventional processes and their transformation to the extent possible in new surroundings – the actions having been performed by our company. The specified and the other measures allowed us to meet a challenge and fulfill a plan for April and as a result to keep the jobs, do not put on enforced leave and pay salaries, premiums and bonuses in full. However, we cannot forecast the situation in the future. While in the other countries where the representative offices of our company are located (Poland, China) we may see operating mechanism of the State support for the business, in Ukraine we may still only dream of it.

What about them?

Poland is hardly a perfect example and the resolutions of the state authorities were met with a mixed reaction by the local business and gave rise to many complaints. Nevertheless, we, as representatives of the logistics industry, felt support from both public authorities and financial institutions. During the quarantine restrictions period, the work of consulates on issuing visas for drivers was established. Also we managed to agree on the suspension of lease payments. This is not directly related to public policy, but it demonstrates a willingness to meet the needs of business. Government of Poland as well undertook to pay a partial sum of the salary of the employees for three months provided, however, that the employer does not dismiss the employees and may prove the epidemic adverse effect on the business. Besides, during the epidemic the business may take an opportunity to defer payment of corporate tax and income tax. Also on May 11, 2020, the European Commission approved a business support program for Poland with a budget of 2 billion Polish zlotys (about 450 million euros). The program is partly funded by the EU Structural Funds. The funds will be allocated in the form of loans and government loan guarantees. These are not all but the key measures that if not retrieve a situation but allow to reduce the financial burden.

As for the China, the enterprises carrying out activities there may be exempt from payment of a part of (or underpay) the social security contributions. The central authorities as well discount 50% of interest on loan actually obtained by the enterprise. Amount of medium-term and long-term loans shall be increased and affordable conditions of loan repayment for the enterprises that temporary suffered from the epidemic shall be provided. Besides, the enterprises are entitled to rent decrease and reduction of payment for water supply and electricity, while small and medium businesses leasing the state enterprises property may be released from rent payment for a particular period of time.

What about us?

The measures having been introduced by the Ukrainian authorities slightly improve the situation only for the individual entrepreneurs while large and medium enterprises are not supported by the State during the epidemic, although implementation of some developed measures may significantly assist in business recovery.

Among them:

  • reduction of tax burden. Firstly, for the enterprises belonging to the industries, most seriously affected by the quarantine measures (transport, tourism, hotel and restaurant

business) as well as the enterprises having lost 25% of profit due to quarantine restrictions;

  • implementation of tax reliefs for the investment companies (foreign, national);
  • income tax holiday for the entrepreneurs (employees’ salaries);
  • VAT rate reduction for logistics and courier companies ensuring delivery, storage of essential commodities during quarantine;
  • arrangement of conditions for granting of the state/municipal guarantees under the simplified procedure for the business having attracted/attracting foreign investment capital for the projects implementation;
  • simplification of construction permits and documents issue and approval as well as the other matters of procedure complicating and influencing on the investment projects implementation period;

We understand clearly that upon overcoming the epidemic, the business and economy fail to recover in one day. It will be a difficult and time-consuming process influenced by many factors. Business in Ukraine get used not to wait for the state support and operate under a principle “if only do not interfere”. But currently the State has a chance to prove the contrary and move beyond pronouncement of partnership between the State and business to the actions. And the success is not long in coming.

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