By NEIL HARTNELL
Tribune Business Editor
The deputy prime minister yesterday said the government was "running as fast as we can" to support Bahamians and the private sector with more than $100m in COVID-19 financial aid.
K Peter Turnquest urged the private sector to have patience with the newly-unveiled $60m tax credit/deferral package to assist medium and large-sized Bahamian enterprises as the details are still being worked out ahead of its April 8 launch.
He told Tribune Business that the Ministry of Finance would have to "work out a mechanism" for companies who have already paid their annual business licence fee to participate amid concerns that they would be excluded from an initiative designed to provide payroll support to qualifying firms.
With the "do nothing" alternative simply not an option given the extent of the economic hardship COVID-19 threatens to inflict on Bahamian workers and businesses, Mr Turnquest said the government was doing its best to save jobs and companies within the limitations posed by its post-Hurricane Dorian fiscal constraints.
"We're trying to help here," he told this newspaper. "The alternative is to do nothing. It's absolutely a fluid situation, uncharted, and we have to do the best we can. There are things that have to be adjusted along the way, and as resources become available and not available.
"We're trying to give ourselves some time to work out the details [of the $60m tax credit/deferral plan]. We're running as fast as we can. This is a constantly evolving situation, and by the time we roll it out next week we will have most of the details worked out."
Mr Turnquest's comments came as the private sector questioned how locked-down businesses, unable to earn any revenue after the government enacted its emergency powers, will be able to benefit from the tax credit/deferral initiative he disclosed yesterday to the House of Assembly.
The deputy prime minister, though, suggested that the $60m plan had been deliberately targeted at businesses with larger workforces earning several million dollars in turnover per year. He suggested that many were likely to owe VAT liabilities dating from earlier this year to the Public Treasury, enabling them to qualify.
"Give me some time. There's going to be some issues we have to work out," he added. "I didn't anticipate this was going to work for small businesses. That's why it was targeted at those people with more than 25 employees and over because they will earn a few million dollars in revenue, and are more than likely to have a VAT liability."
Mr Turnquest yesterday said the initiative, mirroring similar COVID-19 responses in the US and UK, was designed to incentivise qualifying companies to retain up to 10,000 Bahamian jobs rather than temporarily lay them off amid the pandemic.
He told the House of Assembly that the three-month initiative could provide qualifying firms with up to $600,000 split equally between a combination of tax credits and deferrals. Those companies with outstanding Business Licence fee payments and VAT receipts will be able to withhold payment and, in return, receive a maximum of $200,000 per month.
Some $100,000, or 50 percent, will come in the form of a "non-reimbursable tax credit". And the other $100,000 will be "deferred" until January 2021, when it will have to be repaid in a series of 12 monthly instalments throughout the year.
To qualify, companies must employ a minimum 25 persons and commit to retaining 80 percent of staff that were present prior to the COVID-19 crisis. "The net effect of this initiative is that, for some businesses, the Government will be paying the salaries of half of their employees for the next three months and providing them with the cash flow to pay the remainder," Mr Turnquest said.
"The Government is budgeting some $60m in revenue foregone over the next three months to facilitate this initiative, of which $30m will be effectively provided by the Government to pay the full salaries of Bahamians over the period.
"The Ministry anticipates that some 200 medium and large-sized entities will take advantage of this initiative that will support the retention of some 10,000 jobs over the next three months."
The 10,000 jobs target is sizeable, even though it is equivalent to around just 5 percent of the 200,000-plus Bahamian workforce. The $60m in foregone revenue, of which $30m will ultimately be paid back next year, takes the total COVID-19 financial assistance provided by the Government to more than $100m.
The tax credit/deferral initiative adds to the expanded $5.9m self-employment jobless assistance initiative, and $5m in payroll grants for small businesses, that were also announced yesterday. These $70.9m worth of assistance measures join $34m announced the prior week, including the $20m small business loan initiative, $4m for food vouchers, and $10m self-employed benefit that was then focused specifically on tourism sector workers.
The Government appears focused on staving off an economic collapse, and keeping some money circulating within the Bahamian economy, prior to the current fiscal year-end three months from now on June 30, 2020. The British Colonial Hilton yesterday became the latest resort to lay-off staff for eight weeks, with assistance to be provided by the industry's Health and Welfare fund.
Mr Turnquest yesterday told the House of Assembly that the Ministry of Finance is continuing to revise its economic and fiscal forecasts, while warning that the near-term outlook "may end up being much more dire" than the previously forecast $1bn in losses due to the complete tourism industry shutdown.
The Central Bank of The Bahamas, in its monthly economic report for May, confirmed that increased domestic and foreign currency borrowing will be required to fill the fiscal holes created by the COVID-19 pandemic.
"In terms of the fiscal sector, expenditures related to the restoration of key infrastructure and social welfare spending, combined with revenue intake disruptions related to COVID-19, are anticipated to weigh profoundly on the Government's fiscal outturn," the Central Bank said.
"Reinsurance receipts and donations from domestic and international sources should mitigate some of the shortfall in revenue. However, the remaining budgetary gap will require a rise in domestic and external borrowings."
The Central Bank did not place a figure on the additional borrowings but, to no one's surprise, added: "The domestic economy is expected to experience a negative outturn in 2020 from the fallout from Hurricane Dorian, combined with the coronavirus (COVID-19) pandemic, which is adversely impacting global economic activity and travel.
"Tourism output is anticipated to moderate, with any recovery heavily dependent on the progress on the international health front. Against this backdrop, the unemployment rate is projected to increase over the near-term, with any job gains concentrated within the construction sector."