Coronavirus pandemic | Tax measures major economies can take to combat slump
Unprecedented times require unusual actions. As Saudi Arabia, the current chair of the G20 presides over a video summit on March 26, it is expected to rely on institutional mechanisms that were firmed up in the wake of the Global Financial Crisis in 2008-09 to decide the points of coordination.
These include the 161-member Global Forum and the 137-member OECD/G20 Inclusive Framework on BEPS (Base Erosion and Profit Shifting). Over the last decade, these institutions have worked on issues of tax transparency and taxation of multinational enterprises.
In case of COVID-19, most big economies have taken initial emergency tax measures to keep the lights on in the crisis.
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Pascal Saint-Amans, the Director at the Centre for Tax Policy and Administration, the main tax policy arm at the OECD shared a list of possible actions that individual jurisdictions could take on the taxation front. They include:
– Waiver or deferment of employer and self-employed social security contributions, as well as payroll related taxes to reduce labour costs and alleviate the suffering of the sectors hit hard by the lockdown.
– Tax concessions for workers in health and other emergency-related sectors to reward those on the frontlines of Covid-19 emergency. These could also be used to incentivise retired workers to temporarily re-enter the workforce.
– Additional time for dealing with tax returns and filings and advance payment schemes and quicker refunds to taxpayers. Some extended deadlines have already been announced by India.
– Deferment of GST, customs or excise duties for critical imported items such as food, medicine, capital goods etc is another option. This, however, is getting neutralised as producer countries execute bans. India has already done this on the crucial anti-malarial drug, hydroxychloroquine that can work against Covid-19.
– Speedy tax refunds is one of the important tools in the kit. India, however, is a tight situation with GST revenue growth tepid even without the virus.
– Simplification of procedures for claiming GST relief on bad debts.
– Deferment or adjustment of the advance tax payments on business income based on revision of tax liabilities that take into account the changed economic situation.
– Deferment or waiver of taxes that do not fluctuate with the economic cycle. These could include for example property taxes or business turnover taxes.
– Improvement of loss carry-forward provisions. One option is to turn loss-carry forward provisions into a loss-carry backward provision, where businesses could opt to receive a one-off cash payment.
Individual governments will perhaps pick provisions that work best for them, but this list provides the full extent of the arrows in the tax quiver for Covid-19 for major economies that comprise the G20 cohort.
India has already used some of these measures and a full-fledged economic package is still in the works.
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