Issue

The spread of COVID-19 has prompted many countries to implement unprecedented measures to contain the pandemic and avert economic catastrophe. Consequences include businesses being temporarily shut down, financial market turmoil, an erosion of consumer spending and business investment, and contractions in trade. Aside from responding to the immediate public health emergency, policymakers must ensure workers remain on payroll and businesses remain solvent so the economy can rebound once the worst of the pandemic subsides. This memo will offer a high-level overview of notable business-specific supports introduced in three commonwealth nations (UK, Australia, New Zealand) and the United States. This memo relies primarily on data from the OECD’s ongoing Tackling Coronavirus (COVID-19) research initiative and information gleaned from various government website.

Australia

• Federal Government announced wage subsidy worth 6.5% of GDP to encourage businesses to retain workers. The Job Keeper payment of $1,500 every two weeks covers full-time and part-time employees, those laid off, casual workers employed for at least a year and the self-employed. Eligible businesses include those with a turnover (gross revenue) of less than $1 billion that can demonstrate a 30% decline in turnover. Firms with turnover of greater than $1 billion must demonstrate at least a 50% reduction.
• Coronavirus SME Guarantee Scheme will guarantee 50% of new loans issued by eligible lenders to SMEs worth 2% of GDP. Businesses with up to $10 million in total loan facilities will be able to defer their loan repayments for six months.
• Good Idea – New measures include increasing the threshold for assets eligible for instant tax write-off and expanding access to this regime to larger firms and new accelerated depreciation measures.
• Firms affected can defer payment of tax liabilities for up to four months without incurring interests or penalties for late payment. This includes income taxes, goods and services tax (GST), excises and fringe benefits (employee benefits) tax. These measures have been complemented with measures to accelerate tax refunds, like excess input-GST credits.
• Good Idea – Introduced a mandatory code of conduct (good faith leasing principles) for commercial tenancies (retail, office, industrial) in circumstances where the tenant has an annual turnover up to $50 million and is eligible for the government’s Job Keeper Program. The Code includes rent reductions proportional to the tenant’s decline in turnover to ensure that the burden is shared between landlords and tenants.

United Kingdom

• Coronavirus Job Retention Scheme – For the next three months, all employers are eligible to apply for a grant to cover 80% of retained workers’ salaries of up to GBP 2,500 a month.
• Temporary state loans and guarantee scheme for businesses worth 15% of GDP. This includes the Coronavirus Corporate Financing Facility and the Coronavirus Business Interruption Loan Scheme(CBILS) and will provide loans of up to GBP 5 million for SMEs.
• Coronavirus Large Business Interruption Loan Scheme (CLBILS) will provide a government guarantee of 80% to enable banks to make loans of up to GBP 25 million to larger firms with an annual turnover of between GBP 45 million and GBP 500 million. Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest.
• Self-employment Income Support Scheme provides a taxable grant of up to 80% of previous earnings over the last three years (capped at GBP 2,500 a month and open for self-employed with average profits of less than GBP 50,000). The first grants will be paid in June and will run for at least three months. About a million self-employed work in hard-hit sectors like hospitality, tourism, and entertainment.
• Good Idea – One-off cash grants for hard-hit sectors between GBP 10,000 and GBP 25,000 for business with a property used for retail, hospitality, or leisure, depending on the value of their properties but at a rateable value below GBP 51,000. 100% relief of business rates on property for all properties in those sectors, irrespective of rateable value.
• Businesses and the self-employed are able to negotiate time to pay arrangements with Her Majesty’s Revenue and Customs in the event they may otherwise struggle, or need more time, to pay their taxes. Around 700,000 small businesses will be eligible for an immediate GBP 3,000 cash grant at a cost of GBP 2 billion.
• Deferral of Value-Added Tax (VAT) payments worth around 1.4% of GDP for the second quarter of 2020 until 2021.
• Good Idea – Competition authorities have temporarily softened rules that inhibit co-operation between supermarkets to permit sharing of data and distribution depots (Government of Canada temporarily enacted a broadly similar measure by temporarily relaxing competition laws to help facilitate cooperation between firms producing much-needed medical supplies.)

New Zealand

• Government announced lump sum, 12-week wage subsidy (at least 80% of income where reasonably possible). Eligible businesses include the self-employed, contractors, sole proprietors, registered charities, incorporated societies, etc. Businesses must demonstrate a 30% revenue drop attributable to COVID-19; retain workers for at least the duration of the grant; and pay workers, at a minimum for any work they do at their normal rate. Employers must pass the full amount received onto the worker except where a person’s income is normally less than the subsidy amount, in which case they can be paid their normal salary. Any difference should be used for the wages of other affected staff.
• Government announced changes in business taxes to help with cashflow. Firms are to be supported through business tax changes, including an increase in the provisional (business income-related) tax threshold and the ability for eligible businesses to claim deductions in their tax return for commercial/industrial buildings to help encourage investment in new and existing buildings.
• NZD $600 million will be spent on support for the aviation industry. The government has also approved a debt funding agreement (convertible to equity) with Air New Zealand to ensure continued freight operations, domestic flights, and limited international flights.
• Business Finance Guarantee Scheme for solvent SMEs, with the government bearing 80% of the risk of these loans and banks the remaining 20%. To support this, the Reserve Bank of New Zealand (RBNZ) introduced the Term Lending Facility that provides funding for banks for terms of up to three years at low interest rates.
• Government and RBNZ announced a support package for homeowners and businesses including a six-month interest and principal payment holiday for mortgage holders and SMEs who have lost income.Businesses with annual revenue between $250,000 and $80 million can apply to their banks for loans up to $500,000, for up to three years. The scheme will offer a total of $6.25 billion in loans to New Zealand businesses.
• Good Idea – Government announced it will introduce legislation providing insolvency relief to businesses by placing existing debts into hibernation until normal trading resumes.

United States of America

• One-time cheques – Individuals making less than $75,000 will receive $1,200. Couples making less than $150,000 would receive $2,400. Payments are gradually reduced as income increases. Families will also receive an additional $500 per every child. The US approach here is essentially an indirect wage subsidy and is rather unique in this regard.
• Provide Small Business Loans and Grants – Support, issue, and guarantee loans to small businesses; offer loan forgiveness for funds spent on payroll, rent, mortgage interest, and utilities; provide emergency grants for small businesses; and issue grants related to small businesses and entrepreneurial development.
• Support Loans & Loan Guarantees for Large Businesses – support $4.5 trillion of loans to businesses, states, & municipalities via new Federal Reserve facility; loans to passenger and cargo airlines; and loans to firms vital to maintaining national security.
• Business Tax Cuts – Loosen Tax Cuts & Jobs Act caps on interest deductibility and operating losses; offer payroll tax credits for businesses who retain workers at a loss; delay employer payroll tax payments from 2020 to 2021 and 2022; allow retailers & restaurants to write off the cost of improvements; and allow liquor distillers to make hand sanitizer tax-free.
• Small Business Administration will offer low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury.

Conclusions

Generally speaking, the English-speaking countries have responded with the same basket of business supports with some variation depending on local circumstances. The US is unique among the rest of the English-speaking countries in its decision to send out one-time cheques to individuals and households rather than a direct wage subsidy paid to employers. In this crisis, the state has become the insurer of last resort, as opposed to the employer of first resort as was the case during both world wars.