The Coronavirus emerged in Wuhan, a city of 11 million people in China's Hubei province, in late 2019. The vast majority of this illnesses was restricted to China for first two months. As number of infections have plummeted in China, the Coronavirus outbreak has shaped into a global pandemic spreading across more than 150 countries, India being no exception.
The Indian Government has introduced number of measures, including self-isolation orders, travel restrictions and screenings at airports, suspension of travel visa etc. in order to curb the widespread.
Taxation as part of Government policy can also pay its part to bolster the economy. In fact, if used adequately, some key tax measures, with right timing and implementation may catapult the economy to its feet.
Vide this article, we have highlighted some of the international best practices and how the same can be used in the India context to contain the negative financial ripple effect caused by this virulent contagion.
International best Tax practices amid Coronavirus pandemic
Many countries all over the world have been undertaking swift actions to curtail the spread of Coronavirus pandemic. One of the first Country to announce relief measures to contain the damage was China. To help control the spread of COVID-19 and enable businesses and individuals to resume work and production, the Chinese government has successively rolled out different batches of tax and fee incentives.
In terms of frontline support measures, the Government has introduced subsidies and bonuses for medical workers and related staff who participate in controlling the virus and administering treatment. These bonuses are exempt from individual income tax.
Further, said measures also includes:
- Full refund of newly introduced VAT for producers of important anti-epidemic materials;
- VAT exemption for incomes derived from transportation of essential supplies
- VAT exemption on receipt of donated goods for epidemic control; and
- Tax- free imports of essential items like reagents, disinfectant equipment, ambulance.
Further, for providing support to various businesses, temporary respite has been given to enterprises from social security contributions in order to reduce the labor cost.
On compliances front, due dates for filing returns have been extended and measures have been implemented to promote zero physical contact with the tax authorities.
USA and Canada
The United States has announced slew of measures to combat the deadly virus which has been declared as a national emergency. The U.S. SEC has provided regulatory relief from certain obligations to companies having operations in regions effected by COVID-19. Further, due date for payment of taxes (Property tax, Indirect tax, Income tax) has been extended for effected taxpayers. The U.S. Government has also waived certain excise tax provisions on distilled spirits used in production of had sanitizers.
Further, the States is also contemplating the idea of direct cash payouts as a part of $850 Billion stimulus.
In Canada, tax return filings and tax payment deadlines have been extended.
China’s neighboring countries such as Japan, Thailand and Malaysia have also announced a host of measures to deal with the pandemic. For instance, Japan has extended the filing and payment deadlines for individual income tax, gift tax, and individual consumption tax for 2019.
Thai Government has announced several tax relief measures in response to COVID-19 outbreak which include reduced withholding tax rates, enhanced rate of deduction for interest payments made by certain taxpayers, tax return filing extensions and deductions for donations made to support COVID-19 measures.
Next to China, Italy is the worst effected amongst all the countries in Europe and had to resort to lockdown of entire country to prevent the spread of disease. In response to the current emergency situation, Italy Government has announced that tax hearings other than litigations causing serious damage would be postponed.
In addition, the Government has also announced the suspension of audits of tax returns and other audit, assessment, inspection, collection and litigation actions to address the emergency.