Database on tax policy measures in response to Covid-19
The OECD issued a new report on April 15, 2020, summarizing measures implemented by jurisdictions to date and looking at how tax can be used in recovery efforts. In addition to taking stock of tax responses to the crisis, the OECD also looks at how tax can be used in future recovery efforts, with a focus on multilateral collaboration, while not excluding the introduction of exceptional tax measures.
Points made by the OECD on the recovery efforts include:
- Multilateral collaboration will be vital for recovery.
- All options should be explored, including revamping old tools, introducing new ones, and bolstering ongoing efforts to address the international tax challenges posed by the digitalisation of the economy.
- Recovery would require carefully removing some short-term measures and targeting stimulus where policies would be most effective.
- Expansionary fiscal policy could focus on reducing those tax categories that are most harmful to clean and inclusive growth, while seeking to avoid windfall gains to businesses and households.
- Containment and recovery policies can co-exist.
- The unprecedented nature of the crisis is prompting reflection on whether some exceptional measures could be contemplated, as has been the case after major wars or major fiscal crises. This involves suggestions for new sources of revenue or modifying the tax mix in existing systems.
- Some academics and other stakeholders have recommended extraordinary revenue raising measures. Suggestions to use the tax system to tax back additional income earned during the crisis are being floated. Academics are also mentioning carbon pricing tax measures as a way to combine revenue raising objectives with a more fundamental, long term structural reform.
- There is evidence that introducing new taxes is less difficult at a time of major policy reforms.
- Increased use of digital services and the need to expand revenue raising could provide new impetus to efforts to reach agreement on the OECD Pillar 1 taxation of the digital economy issues internationally. The focus of the work on companies with high levels of profitability should facilitate revenue raising without negatively impacting the recovery of companies that have suffered heavily from the crisis.
- In a post-crisis environment, it is likely that addressing the tax challenges of the digitalization of the economy and ensuring that MNEs pay a minimum level of tax (Pillar 2) will become more prominent.
- The tolerance in developing countries for international tax avoidance and evasion will decrease and untaxed income globally will be prioritized.
An updated version of the report was published on July 31, 2020.
- On May 26, 2020, the OECD issued Tax Administration Responses to COVID-19: Recovery Period Planning , a report prepared by the OECD's Forum on Tax Administration (FTA) in co-operation with the Intra-European Organisation of Tax Administrations (IOTA) and the Inter-American Center of Tax Administrations (CIAT), which outlines how tax administrations can prepare for the potentially prolonged, uncertain and complex recovery period from the COVID-19 crisis.
- On April 3, 2020 the OECD issued recommendations on the implications of the COVID-19 crisis on cross-border workers and other related cross-border matters, based on an analysis of the international tax treaty rules. The OECD:
- observed that this unusual situation is raising many tax issues—especially when there are cross-border elements in the equation, for example, when there are cross-border workers or individuals who are stranded in a country that is not their country of residence. These issues have an impact on the right to tax between countries, which is currently governed by international tax treaty rules that delineate taxing rights.
- found that certain exceptional circumstances of the COVID-19 crisis call for an exceptional level of coordination and co-operation between countries, notably on tax issues, to mitigate the potentially significant compliance and administrative costs for employees and employers. The OECD encourages countries to work together to alleviate the unplanned tax implications and potential new burdens arising due to effects of the COVID-19 crisis.
- On July 30, 2020, the OECD issued a report on Tax Administration Responses to COVID-19: Assisting Wider Government. The report, put together with the assistance of the OECD Forum on Tax Administration's Enterprise Risk Management Community of Interest, sets out a few considerations that administrations may wish to take into account in light of their new responsibilities to support wider government actions to help address the impact of the COVID-19 crisis. It also highlights opportunities to build on lessons learned to improve the resilience and agility of tax administrations for the future.
- On March 31, 2020, the OECD Forum on Tax Administration (FTA) published a global reference document setting out actions that FTA tax administrations are currently taking to support taxpayers, in the light of the worsening global impacts of COVID-19 on individual taxpayers, businesses and the wider economy. These include measures to address cash-flow concerns, difficulties in meeting reporting and payment deadlines and communication initiatives. Other actions taken by the FTA to help tax administrations join-up as effectively as possible are to:
- Bring together officials virtually from across the global FTA membership to discuss measures to support individual taxpayers and businesses and to ensure continuity of tax administration operations both domestically and internationally.
- Launch a new discussion forum to support real-time communication on COVID-19 responses on the Knowledge Sharing Platform, allowing all tax administrations globally, including developing country tax administrations and regional tax organizations, to share knowledge and experiences as well as providing a means to address the more detailed questions administrations will have.
- Work urgently together across the FTA on analyzing and where possible addressing tax issues resulting from employees temporarily being stranded in different jurisdictions because of travel restrictions, self-isolation policies or other reasons connected to COVID-19.
- On March 20, 2020, the OECD published a range of tax policy and tax administration measures that could be considered by governments. The OECD stressed that these potential measures are not recommendations but are intended to assist policymakers as they respond in their own national context. The measures include:
- Temporarily provide more generous welfare payments and income support;
- Waiving or deferring employer and self-employed social security contributions, as well as payroll related taxes;
- Providing tax concessions for workers in health and other emergency-related sectors;
- Deferring payments of VAT, customs or excise duties for imported items;
- Speeding up refunds of excess input VAT, accompanied by targeted measures to limit fraud risks;
- Simplifying procedures for claiming relief from VAT on bad debts;
- Adjusting the required advance payments on the basis of a revised expected tax liability;
- Deferring or waiving taxes that are levied on a tax base that does not vary with the immediate economic cycle;
- Increasing the generosity of loss carry-forward provisions;
- Preparing for recovery including through tax policy.
This follows a separate publication by the OECD on March 16, 2020 on the ways that governments and tax administrations can ease burdens on taxpayers and support businesses and individuals with cash-flow problems or with difficulties in meeting tax reporting or payment obligations. This included:
- Extension of deadlines;
- Deferral of tax payments;
- Penalties and interest for late filing or payment could be suspended or possibly refunded depending on circumstances.
- Taxpayers could be given easier access to payment plans and extensions of plan duration. Consideration may also be given to having an interest free period.
- Suspending debt recovery and quicker refunds
- Consideration of not auditing taxpayers during the crisis (other than where fraud is involved).
- Consideration of adjustments to taxpayer services, including increased use of digital channels, dedicated hotlines and, where practicable, longer opening hours of telephone centers;
- Clear communication strategies, including dedicated webpages, multifaceted media communications, and consideration of how to identify and reach vulnerable taxpayers.
- The Organization for Economic Cooperation and Development (OECD) announced as 26 May the release of a report that outlines how tax administrations can prepare for the potentially prolonged, uncertain and complex recovery period from the coronavirus (COVID-19) pandemic.
- As noted in the OECD release, the report—Tax Administration Responses to COVID-19: Recovery Period Planning—highlights that even during the immediate crisis period, there will be significant benefit from early business restoration planning to help identify the main challenges and opportunities for both tax administrations and taxpayers, and to take early preparatory actions.
- In undertaking business restoration planning, tax administrations will need to take into account the distinguishing features of the COVID-19 pandemic which, unlike other crises, are likely to persist during the recovery period, in particular:
- The continued risks to health, including from further outbreaks
- The impacts on staff and administration systems as a result of the need for continuing adjustments
- The potential length and volatility of the recovery period given the depth and scale of the economic shock.
PE and Place of Management
The OECD issued a report concerning tax and fiscal policy responses to the coronavirus (COVID-19) pandemic.
The report shows that while many governments have taken rapid, extensive, and often unprecedented action, getting the support to “the most vulnerable households and firms” still poses significant challenges.
- Developing countries will need specific support—notably significant financial support—for helping health and fiscal systems withstand the current shocks.
- Maintaining business cash-flow has been a core goal of the fiscal policy measures. Measures include extending deadlines for tax filing, deferral of tax payments, faster tax refunds, more generous loss offset provisions, and some tax exemptions.
- Governments have also helped businesses retain their workers through short-time work schemes or wage subsidies, and have extended income support to households, eased access to and expanded eligibility for sick-leave benefits, and sometimes broadened the coverage of unemployment benefits to self-employed workers.
On May 4, 2020, the OECD held a webcast on which it noted that with global economic activity facing a historic drop and government spending rising dramatically, the implications of the Covid-19 crisis on public finances and tax revenues are significant. Drawing on its multi-disciplinary expertise, the OECD is deploying its data gathering and analytical capacities to help governments face these unprecedented challenges while supporting businesses and people towards economic recovery. The OECD specifically noted that:
- Governments are taking multifaceted actions to support their citizens and businesses and to maintain the provision of vital public services, often putting new and unforeseen pressure on public finances.
- The OECD is providing critical advice on a range of tax topics while using its large tax co-operation network to facilitate collaboration among all countries.
- A recent report examined emergency tax and fiscal policy measures introduced by countries in response to the COVID-19 crisis, and noted that tax and fiscal policy responses “are playing a key role in limiting the hardship caused by containment measures, and should continue to do so as governments seek to pursue economic recovery from the global pandemic.”
- Among the tax relief items are measures being taken to ease the burdens on taxpayers and to support businesses and individuals with cash flow problems, with difficulties in meeting tax reporting or payment obligations or otherwise facing hardship.
- The strict quarantine requirements have led to new concerns over tax treatment of cross-border workers, many of whom are stranded in a country that is not their country of residence or unable to physically perform their duties in their country of employment. This situation has an impact on the right to tax between countries, which is currently governed by international tax treaty rules that delineate taxing rights. The OECD has issued guidance on these issues per member countries’ request.
Tax Policy Reforms 2020
On September 3, 2020, the OECD published Tax Policy Reforms 2020 , a report which describes the latest tax reforms across OECD countries, as well as in Argentina, China, Indonesia and South Africa. The report identifies major tax policy trends adopted before the COVID-19 crisis and takes stock of the tax and broader fiscal measures introduced by countries in response to the pandemic, from its outbreak to June 2020.