Seeking to highlight what governments can do to lessen the coronavirus pandemic’s economic fallout, the Organisation for Economic Co-operation and Development recently released advice for tax administrators.
The OECD’s concisely written policy suggestions are not intended as recommendations but rather are designed to assist policymakers as they respond in their own national context. The immediate priority, the organisation notes, is to rapidly “support households and improve liquidity for businesses to keep the productive capacity of economies intact as much as possible”. A variety of tax policy and tax administration approaches can further these objectives.
The OECD’s policy suggestions are drawn from tax relief measures that various governments have recently considered or enacted. A link to this country-by-country data can be found in a recent article by Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration.
Some tax administration responses that governments can adopt as emergency measures, the OECD says, include:
- Extending tax deadlines;
- Deferring instalment tax payments;
- Suspending the garnishing of wages or bank accounts and asset seizures;
- Providing quicker refunds;
- Reducing audits (other than where fraud is involved); and
- Improving communication strategies to reach vulnerable taxpayers.
Some temporary, targeted tax policy measures the OECD says are worth considering include:
- Temporarily providing more generous welfare payments and income support through the tax system to individuals and workers, including people who are normally not entitled to such payments;
- Waiving or deferring employers’ social security contributions, as well as payroll-related taxes, to quickly reduce labour costs in hard-hit sectors;
- Rewarding workers in health and other emergency-related sectors for working in potentially dangerous conditions by giving them special breaks on their income tax;
- Making various changes to value-added tax (VAT), such as speeding up refunds of excess input VAT, simplifying procedures for claiming relief from VAT on bad debts, deferring payments for imported items (eg, food, medicine, and capital goods), and avoiding abuse through careful administration;
- Instead of using last year’s sales or profits as a proxy, adjusting businesses’ advance payments to account for the expected impact of the pandemic on business turnover;
- Waiving or deferring taxes if the tax base does not vary with the immediate economic cycle, eg, recurrent business property taxes or business turnover taxes; and
- Increasing the generosity of loss carryforward provisions.
For additional policy suggestions relating to health, education, employment, and other matters, visit the OECD’s COVID-19 platform.
For more news and reporting on the coronavirus and how management accountants can handle challenges related to the outbreak, visit FM’s coronavirus resources page.
— Dave Strausfeld, J.D., (David.Strausfeld@aicpa-cima.com) is an FM magazine senior editor.