Government’s COVID 19 Stimulus MeasuresApril 23, 2020
Freeport, Grand Bahama, The Bahamas – On Monday the 30th March 2020 the Deputy Prime Minister and Minister of Finance, K. Peter Turnquest addressed the Bahamian House of Assembly in order to provide an overview of the expected economic fallout from the COVID-19 pandemic along with some detail as to the Government’s proposed stimulus measures to support citizens and businesses during this time. The following is a summary/highlight of those measures.
SOCIAL ASSISTANCE FOR WORKERS ON REDUCED WEEKS
- Four million dollars is to be set aside by the Government for disbursement by the Department of Social Services for food assistance and social support for displaced workers directly impacted by COVID-19.
- The food assistance vouchers under this initiative are valued at $100. They are to be disbursed every second week, priority to be given to persons within the hospitality industry who are facing reduced work weeks.
EXPANDED UNEMPLOYMENT ASSISTANCE FOR SELF-EMPLOYED WORKERS
- The Government has introduced a special unemployment assistance programme for self-employed persons in the tourism sector. This program covers sole proprietors and agents without employees who earn most of their income in the tourism sector.
- Those who were originally set to benefit from this benefit include: straw vendors, hair braiders, taxi drivers and jet ski operators.
- This programme has now been expanded to include other licensed self-employed persons who are impacted by the COVID-19 Emergency Orders and who meet the specified criteria.
SMALL BUSINESS DEVELOPMENT CENTRE (SBDC) SUPPORT FOR SMALL AND MEDIUM SIZED BUSINESSES (MSMES)
A Business Continuity Loan Program is being offered through the SBDC with the aim of assisting MSMES businesses. The SBDC rolled out the Government’s $20 million COVID-19 response which is targeted to provide loans to small businesses, ranging from $5,000 to $300,000. Approved loans will have a payment grace period of four months.
- Partnering financial institutions will facilitate the loan processing which will include the vetting of the required information, the approvals, the issuing of funds, and the collection of payments after the four-month moratorium. These loan monies are to be designated for operating costs such as paying salaries, rent, insurance, utilities and inventory/supplies.
- Small businesses that quality must agree to retain 51% of its staff and agree to have credit information shared with the Credit Bureau and other banking and financial institutions in the future.
GOVERNMENT TAX CREDIT & TAX DEFERRAL EMPLOYMENT RETENTION PROGRAMME
The Government’s Tax Credit and Tax Deferral Employment Retention Programme will provide businesses with payroll support in an effort to retain up to 10,000 jobs.
- Under this programme, qualifying businesses can receive assistance under a tax credit and tax deferral to help cover payroll expenses.
- The programme allows businesses to defer the payment of certain taxes and to benefit from a tax credit, up to $300,000 in each instance. This accommodation is specifically being made to provide businesses with enough cash flow to preserve current employment levels. Businesses will have to commit to utilization of the tax credit solely for the purpose of covering payroll requirements.
- A qualifying business will need to make an application to the Ministry of Finance and if approved will be able to withhold their outstanding business license or VAT receipts collected – up to $200,000 per month for up to three months. If a company qualifies at the maximum funding level, then one half of that monthly sum, or up to $100,000, will be in the form of a non-reimbursable tax credit. The other $100,000 will be deferred until January 2021 when it will be paid back in equal monthly installments over 12 months.
- To qualify for the programme:
- a business must have a minimum of 25 employees;
- the qualifying amount for a participating business cannot exceed its non-executive payroll for the relevant period;
- companies must commit to retaining 80 percent of their staff count as at February 2020; and
- companies must be in good standing with the government agencies responsible for the collection of taxes and fees.
- There will be certain business sectors that will not be eligible for the programme, such as retail or wholesale grocery, hotel and resorts, regulated financial and insurance entities, regulated telecommunications businesses and gaming businesses.
- Please note that further details on this programme are to be published by the Ministry of Finance and applications for this programme will be available by Wednesday, 8th April 2020.
DEFERRAL OF LOAN PAYMENTS FOR BORROWERS EFFECTED BY COVID-19 PANDEMIC
- The Central Bank of The Bahamas announced on the 24th March 2020 that it has arranged with domestic banks and credit unions to provide a 3-month deferral of repayments on credit facilities for businesses and households that were negatively impacted by the COVID-19 pandemic.
- The Central Bank claims via its website that this accommodation will be revisited in June 2020, for appropriate changes that may still be warranted.
- It should be noted that:
- preference will be provided for borrowers who maintained their accounts in good standing before the onset of the pandemic;
- such payments will resume, with accrued interest, when the financial circumstances of such borrowers recover;
- some financial institutions have already announced credit support that could extend beyond three months; and
- the administrative approach to implementing these and other accommodation will vary across lending institutions, the Central Bank will extend tolerant regulatory treatment to exclude these credit balances from being classified as arrears or restructured loans.
- We further note that complete details of the programme and relevant updates can be found on the Central Bank of The Bahamas’ website (https://www.centralbankbahamas.com/news.php?cmd=view&id=16689) and therefore, that website should be monitored by those wishing to take advantage of the programme.
It should further be noted that by way of “The House of Assembly Communication COVID-19 Orders” on the 6th April, 2020 Prime Minister Minnis made clear that the Government would be introducing additional economic stimulus measures in order to help counteract the economic impacts of COVID-19.