Important measures are being taken by countries and territories around the world to protect public health, in an effort to slow the spread of COVID-19, and calm public concerns. Financial support for ill and unemployed workers is at the heart of these measures.
Simultaneously, it has been necessary for many major governments to introduce incentives and economic relief programs that not only provide a financial cushion for affected individuals, but also fight the broader economic disruption caused by the virus. These programs are intended to help alleviate business stress and bolster economies.
The program components vary widely, reflecting each country/territory’s key business drivers and most urgent needs. Despite the variations, I believe these programs share two essential objectives: protection and sustainability. They help to protect the economy by restoring confidence, stimulating investment, and keeping people employed, with the ultimate goal of achieving sustained business and economic health and social well-being.
The financial incentives and economic stimuli are wide-ranging. Some, such as those in Japan, include interest-free, non-collateral loans for businesses that have experienced sales losses due to COVID-19. In China, the government is encouraging banks to offer loans at an interest rate of less than 1.6% to enterprises that produce, sell, or transport medical products and daily necessities. A 100% expense deduction has also been introduced in China for equipment investments that expand production capacity. Israel has introduced an innovative grant program of approximately US$13 million for startups and established companies that have research and development plans, proofs-of-concept, products and technological solutions that address the impact of the COVID-19 pandemic.
Additional financial relief mechanisms include corporate income tax rebates, deferral of government payments, and reductions in tax rates to help owners retain more immediate cash in their business. The Irish Revenue Agency has announced that interest will not be payable on late tax payments in order to aid company cash flow.
In Israel, small and medium-sized businesses facing liquidity problems due to the current situation have access to additional loans through the State’s Small Business Fund and special programs created by the banks. Similarly, Canada recently announced a CAD55 billion package to help sustain business liquidity through tax-filing deferrals and a CAD10 billion credit extension. (At the time of publication, details of the U.S. stimulus-program were pending.)
Several countries are providing incentives for specific industries, such as tourism, shipping, airlines, and manufacturing, which have been particularly hard-hit by the effects of COVID-19. Businesses in Singapore’s tourism sector can access temporary bridge loans, for example, to support their immediate cash-flow requirements, service taxes are being deferred for hotels in Malaysia.
In addition to providing businesses with financial support, some countries are also introducing innovative government programs to address an urgent need to adopt creative work models for keeping people employed. These include initiatives such as Australia’s income-support for close to 120,000 apprentices, and a targeted jobs scheme in Singapore that helps companies retain local workers.
In other jurisdictions, business management guidance, such as the government-sponsored mentorship programs and financial workshops in Australia, are being introduced to help business owners strengthen their financial management and planning skills.
Irrespective of the tools and mechanisms that are being employed, it is clear that government and industry have come together across the globe to fight COVID-19’s impact on entrepreneurs, family businesses, family offices and private companies.
This global overview of government initiatives is the first in an ongoing series of blog posts which will seek to probe more deeply into the country/territory-specific details of the economic stimulus and incentive programs that are continuing to evolve across Asia, Europe, and North America.
We at KPMG Private Enterprise understand the potential consequences of the current global health situation for private companies. I encourage you to follow our regular series of blog posts to stay informed about how COVID-19 may affect your business strategy and operations. Please do reach out to KPMG Private Enterprise advisers in your jurisdiction for their guidance.
Please visit the KPMG website for our business overview and action checklist entitled “Understanding the Implications of COVID-19 for private companies" (PDF 382 KB).