The Vanuatu Government has committed itself to supporting the country’s economy during the COVID-19 crisis, with an objective to keep people safe, employed and keep businesses open.
Caretaker Prime Minister Charlot Salwai officially announced a major economic stimulus package Tuesday to support the economy through these difficult times and bring some comfort to many who are already struggling.
“The global spread of COVID-19 pandemic presents a potentially catastrophic outlook for both public health and the economy,” he said in his official statement.
“With the economies of Vanuatu’s major trading partners effectively ‘locked down’, substantial restrictions on crossing international borders, and the prospect of a global contraction, we are now looking at much lower economic growth in 2020 than we have forecasted at budget time.
“The official economic growth forecast for 2020 has now been revised from 3.8% to 1.9%, and, given the highly uncertain nature of this emergency, we must be prepared for a scenario where growth may fall even further;
“While the Government has responded rapidly to the health aspects of the crisis, we are also addressing the economic impacts.
“The stimulus package is a coordinated response involving government agencies, the Reserve Bank, development partners, and the private sector, and has been designed to boost economic growth through the combination of mix fiscal and monetary policy actions.
“The overall objectives of the package are to keep people safe, keep them employed, and keep businesses open.
“The package will be released in stages as economic developments unfold. The value of the first stage stimulus that I announce today amounts to approximately VT4 billion or around 4% of GDP.”
This includes Road Tax, Work Permits fees, Business Licenses fees (except for commercial banks), Residence Permit charges and Rent Tax;
In addition, a range of other fees and charges will be cancelled. These measures will help to provide much needed cash flow to businesses and reduce costs;
Another key initiative relates to Business license reform which includes reducing the turnover tax of commercial banks from 7% to 5%. This will support more efficient banking and encourage lower interest rates, fees and charges;
Furthermore, the requirement to pay turnover tax on zero rated or exempt VAT sales will be removed. This will assist financial institutions, insurance entities, and professionals become better equipped to supply international services in an increasingly competitive international market;
The business license reform measures will be backdated to begin on 1 January 2020, and or those businesses who have already paid these taxes, license fees, and charges, you will be refunded.
He continued, “I also wish announce additional expenditure measures in the form of employment and business subsidies as part of the stimulus package.
These include:
Supporting jobs through the Employment Stabilization Payment, which will reimburse employers up to VT 30,000 per employee on their payroll each month for a period of four months;
Employers will also receive a payment of 15 per cent of the amount they are reimbursed for wages under this payment as an added incentive to keep their staff employed;
Additionally, small to medium businesses with a turnover of less than VT200 million will have access to an additional payment equal to the value of the fees of a full year business license.
To be clear, this is a direct payment in addition to the business license cancellation or refund mentioned as part of the revenue initiatives. Again, this will provide much needed cash flow to struggling businesses.
We will also support productive sector, in particular, copra, kava cocoa and other commodities that provide income to our citizens.
In the similar manner, we will provide assistance to transport sector to facilitate market to major centres such as Port Vila.
The caretaker PM added, “In addition to these stimulus measures, we still plan to fully implement the 2020 Budget, although obviously, many programs will now be reallocated to policies directed at addressing COVID-19.
Photo supplied Caption: Caretaker Prime Minister Charlot Salwai Tabimasmas