Milan-based advisor Antonio Lanotte examines the Italian government’s maxi anti-coronavirus decree
Italy’s maxi anti-coronavirus decree, launched on March 16 from the Council of Ministers and published in the Official Gazette on March 17, introduces a €25 billion package to help protect businesses and families from the economic repercussions of the Covid-19 pandemic.
The decree is just one step in Italy’s fight against the coronavirus outbreak affecting not only Italy, but increasingly, the whole of Europe. The next necessary step will be another urgent decree, scheduled for April 2020, which will put forth measures for growth.
The Italian treatment
Of the €25 billion within Italy’s maxi anti-coronavirus decree, €3 billion will be used for a cash injection for all companies - even those with just one employee. More than €10 billion will be made available to workers, including
the self-employed: all will receive a one-time cheque for €600 in March. Meanwhile, VAT and workers' social taxes and charges will be postponed.
There will also be €10 billion to help families and workers, through measures such as the suspension of mortgage payments on the first house for those whose salaries are affected by the pandemic.
In total, €25 billion worth of fresh money will go towards protecting jobs, the health system, and families. This sum could later be supplemented by a total €350 billion over the coming years to support the real economy. Thanks to the state’s guarantees, the decree itself is not just a strategy to manage the immediate contagion, but also a first step towards a different type of economic strategy in future.
Health and civil protection
The first part of the decree concerns the strengthening of health and civil protection, with approximately €1.15 billion for each. The National Emergency Fund will receive €1.65 billion. For the national health system, 20,000 extra hires have already been approved. Around €150 million has been allocated for overtime payments to doctors and nurses. An expansion of the territorial assistance networks is also expected, with up to €350 million allocated. The government has also called upon private healthcare providers to make available on-duty healthcare personnel, premises and equipment. Regional governments can also activate temporary health areas inside and outside of shelter, care, reception and assistance structures.
Around €50 million will be allocated for extraordinary loans, at very fair conditions, for the manufacturers of medical devices and masks - under the supervision of Invitalia, the national agency for foreign investments and the extraordinary commissioner for this emergency, Domenico Arcuri. Mask production is encouraged, and being supervised by the health minister.
For 60 days from the entry into force of the decree, companies will not be able to fire anyone, even in the face of a sharp reduction in turnover. All pending layoff procedures initiated after February 23 are also suspended.
To provide liquidity to companies, the government allocates a €1 billion dowry to strengthen the SME guarantee fund
The period of quarantine or supervised isolation is equated to illness. The government allocates a total of around €10 billion to support the salaries of the five million workers unable to work, either because they themselves are sick or if they need to care for family members at home following the closure of schools.
Funding for layoffs amounts to €5 billion, which becomes universal: employers who suspend or reduce work due to events attributable to the epidemiological emergency can apply for the ordinary treatment of wage supplementation citing coronavirus as the reason.
In general, even for the public sector, remote work or so-called smart working is encouraged, with workers encouraged to use holiday if this is not possible. This ensures that the minimum number of staff can guarantee essential services.
Leave and bonuses
Working parents with children up to 12 years of age - with no age limit for disabled children - will be able to take advantage of a 15-day break, which will also be extended to self-employed citizens enrolled in the separate management of INPS, national social security agency.
An allowance equal to 50% of pay will be made available. For this measure, the budget is €1.2 billion. Alternatively, there is a babysitting bonus of €600, which rises to €1,000 for doctors, nurses and other health workers.
Workers will also be able to access 12 days of additional paid leave (Law 104) for March and April, with an additional allocation of over €550 million.
The self-employed and VAT holders.
For professionals and the self-employed, €3 billion has been allocated to protect a period of inactivity for almost five million people. A one-time allowance of €600 for March (renewable later in April with a further measure) is granted to self-employed workers, occasional workers, and seasonal workers in tourism and agriculture.
More cash to businesses and families
To provide liquidity to companies, the government allocates a €1 billion dowry to strengthen the SME guarantee fund, which can be accessed free of charge with an increase in the maximum amount per individual company to €5 million.
The Ministry of Economy is also authorised to issue a state guarantee in favour of Sace, a national agency which supports export credit in the tourism sector, which has been hit hard by the ongoing health crisis.
The illustrated decree is the first necessary step to build a dam against the coronavirus outbreak
For micro and small and medium-sized enterprises, there is a clause to save credit lines and suspend the payment of mortgage installments until September 30. For larger companies, the public guarantee mechanism instead provides for the involvement of Cassa Depositi e Prestiti - the Italian Investment Bank - with an endowment of €500 million.
For companies and professionals, a tax credit worth up to 50% expenses incurred to sanitize working environments and working tools, up to a maximum of €20 thousand.
For small traders and shops, a tax credit worth up to 60% of their rent will be made available for March 2020.
For air transport, a fund of €500 million has been established. The decree also provides an ad hoc regulation for Alitalia, with the authorisation to set up a new company wholly controlled by the Ministry of Economy, or controlled by a company with predominantly public participation, including indirectly. In addition, a redundancy fund €200 million will be granted to Air Italy employees.
Taxes and social charges
The National Revenue Agency has already ceased collections, and this will be extended to May 31 following the new decree. Taxes on wages, social security charges (welfare contributions), withholding taxes and social security originally expiring on March 16 will now be delayed.
An exception will be made for companies with a turnover of under €2 million. These firms will not be required to pay taxes - from VAT to contributions - until May 31 in one solution or through five monthly installments.
There is no turnover limit for companies in the sectors most affected by the crisis: tourism and hotels, spas, transport, catering and bars, culture (cinemas and theatres), sports, education, amusement parks, events, arcades and betting shops.
Withholding taxes for professionals without employees and with revenues under€400,000 will also be halted for March and April. After that, in all these cases, companies will have the option of paying in one solution or through five monthly installments.
For all the others not falling in the above mentioned exceptions, the deadline is June 30.
The illustrated decree is the first necessary step to build a dam against the coronavirus outbreak, but as the Italian government has said many times, these measures are just the beginning.
Following the Eurogroup meeting a clear statement was released: these expenses will not affect compliance with applicable fiscal rules, targets and requirements.
The Eurogroup’s commitments so far reflect a strong determination to do whatever it takes
European Commission vice president Vladis Dombrovskis, meanwhile, said on Twitter: ”Today, the Eurogroup pledged to take every step needed to ensure we get through this health emergency. All institutions will act together to respond strongly and jointly defeat this virus. We will liaise continuously to coordinate our response swiftly and robustly”.
The Eurogroup is following the situation closely and is in constant contact to give a strong economic policy response to this exceptional situation. The Eurogroup’s commitments so far reflect a strong determination to do whatever it takes to effectively address the current challenges and to restore confidence and support a rapid recovery.
Now an immediate, coordinated policy response is needed. Policymakers must set a framework to respond to developments and to support the economic recovery within Europe. This should include an additional, huge and stable package of monetary policy measures from the European Central Bank to support liquidity and funding for families, businesses and banks, to smooth the provision of credit to the real economy, and to avoid the fragmentation of euro area financial markets and preserve the smooth transmission of monetary policy.
Beyond the immediate, targeted responses, Europe should also work on an ambitious plan - such as a massive fiscal support programme - starting with a new instrument. Coronavirus bonds could be a eurozone-wide financial instrument used to provide emergency funding. Alternatively, policymakers could create a well-structured European guarantee fund aimed to support SMEs - not only to recover from the disease, but most importantly, to boost the European economy of the future.
Chartered Tax Advisor - Milan
Member of the Tax Technology Committee - CFE Bruxelles