Business As Usual?
Kitty Miv, Editor
29 April, 2020
Although this week we're mostly back into the COVID-19 news cycle after a brief foray into other tax matters last week, national governments such as those in Scandinavia have been doing their best to keep things busy for commentators, both with regard to tax measures relating to the pandemic, and in relation to ongoing international and domestic tax initiatives.
On April 18, 2020, for example, the Danish Tax Ministry revealed that agreement had been reached among politicians on additional tax measures to support companies during the COVID-19 health crisis, with the key proposals this time around being that SMEs will be able to reclaim value-added tax paid in the second half and fourth quarter of 2019 to use as an interest-free loan; the ceiling on credit balances in tax accounts will be abolished in the period to April 1, 2020; and the payment date for research and development tax credits will be brought forward from November to June 2020.
Meanwhile, in international tax news from Denmark, investigations linked to the Panama Papers have revealed almost DKK1bn (USD145m) in undisclosed income, according to a report from the Danish Tax Agency.
The Panama Papers leak concerned more than 11.5m internal documents belonging to Panamanian law firm Mossack Fonseca. The data included emails, financial spreadsheets, passports, and corporate records relating to the ownership of bank accounts and companies in 21 offshore jurisdictions. It covered a nearly 40-year period, through to the end of 2015.
The Danish tax authority paid DKK6.4m for access to information in the Panama Papers linked to Danish citizens in September 2016.
On April 23, 2020, the Danish Tax Ministry announced that as a result of the Tax Agency's investigations, tax demands totalling DKK411m had been issued to 78 companies and 104 individuals.
The Tax Ministry also revealed a substantial increase in tax data acquired through automatic exchange of information agreements, with the Tax Agency receiving more than 600,000 reports in 2019, a five-fold increase from 2017.
Meanwhile, across the Øresund in Sweden, the Ministry of Finance on April 17 announced a proposal to reduce the rate of interest due on tax payments which have been deferred due to COVID-19.
Under the proposal, interest at a rate of 1.25 percent will apply to overdue taxes in the first six months of the deferral period. Thereafter, deferred taxes will be subject to an additional fee of 0.2 percent.
According to the Government, this would represent effective interest rates of 1.6 percent for the first six months and 3.1 percent annually, which would be less than half of the 6.6 percent annual interest rate imposed on overdue taxes under normal rules.
The Government proposed that the interest rate cut should come into force on June 1, although the measure will apply to tax payment deferments granted from March 30, 2020.
In a non-COVID related development in Sweden, the Ministry of Finance also unveiled plans to apply the value-added tax reverse charge mechanism to the trade in mobile telephones and certain other electronic devices, from January 2021. This follows the release of data from the Swedish Tax Agency which shows that there is widespread VAT fraud involving the trading of mobile phones as well as internet telephony.
The VAT reverse charge mechanism is usually deployed as an anti-fraud measure and involves shifting liability for VAT payments from the supplier to the customer. This prevents suppliers from charging VAT on onward supplies and failing to remit VAT collected to the relevant tax agency.
In addition to mobile phones, the Government proposes that the reverse charge mechanism should cover domestic business-to-business supplies of integrated circuit devices, telecommunications services, gaming consoles, tablets, and laptops.
Shifting focus slightly to the EU now, and French Public Accounts Minister Gerald Darmanin recently announced a number of measures designed to assist taxpayers dealing with the ongoing fallout of the pandemic, including that the filling of tax returns and declarations due in the month of May can be postponed to June 30, 2020.
The extension applies to corporate and personal income tax deadlines, as well as to value-added tax deadlines, among others.
Then on April 24, 2020, the French Government announced that it has decided to extend tax and other financial support to companies in sectors most affected by the COVID-19 lockdown measures, including catering, tourism, events, sports, and cultural activities.
Specific tax measures include that small and very small enterprises in these sectors will receive an automatic deferral of social tax payments for the period from March to June 2020.
Medium-sized and large enterprises in these sectors will not benefit from an automatic deferral of their social contributions. However, they will be able to request to spread social tax payments over a longer period, as well as apply for tax debt cancellation. These applications will be considered by the tax authorities on a case-by-case basis.
And in Ireland, in an announcement that surprised precisely no-one, the Irish authorities predicted that the tax take in the country will fall this year as a result of COVID-19.
The Irish Government reported that it expects GDP to fall by 10.5 percent this year and tax revenue receipts to decline by 16.4 percent.
The Government has published an update to its Stability Programme, prepared against the backdrop of the coronavirus pandemic.
According to the figures released by the authorities in the Irish Republic, tax receipts for the first quarter of 2020 were 1.1 percent higher than in the same period in 2019. However, in March, receipts "moved onto a sharp downward trajectory" due, in part, to measures introduced to help firms cope with cash flow issues, such as VAT payment deferrals.
According to the Stability Programme Update, the decline in tax "is expected to accelerate over the second quarter" and "become more broad-based" as other tax heads are affected.
Finance Minister Paschal Donohoe observed, of the figures, that: "The Irish economic landscape, in common with elsewhere, has been turned on its head in recent weeks. The necessary restrictions to limit the transmission of the COVID-19 virus have resulted in a severe recession and unprecedented levels of unemployment."
"There is no doubt that, along with the rest of the world, Ireland is on a difficult road. However, we face into this journey from a position of strength. We can and we will rebuild our economy, continue to provide for society, get our people back to work and keep them safe while doing so." Donohoe concluded.
On that note of (very carefully) measured optimism, I shall take my leave.
Until next week!
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