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COVID Continuity?

Kitty Miv, Editor
26 August, 2020

In last week's column, we looked at recent VAT and indirect tax changes made by governments around the world, sometimes in response to the COVID-19 crisis, but often just in the normal run of tax administration.

This week, we once again return to tax matters directly related to the pandemic, starting in Italy, where the authorities are seeking to make things easier for taxpayers, in terms of compliance and cashflow.

For businesses impacted by the crisis, the Italian Government revealed recently that it will allow tax payments that were deferred during the COVID-19 lockdown to be paid in instalments over a two-year period, with penalties and interest suspended provided that the payment terms of the scheme are adhered to.

In Bulgaria, meanwhile, the Government moved ahead with planned changes to its VAT regime, published legislation in its Official Gazette on August 11 to give effect to value-added tax relief for firms that have been heavily impacted by the COVID-19 pandemic.

Under the changes, certain sports facilities, such as gyms; services provided by tour operators; and beer and wine served in restaurants and catering outlets will be taxed at the reduced nine percent VAT rate. The change applies between August 1, 2020, and December 31, 2021.

Then in Hong Kong, the Inland Revenue Department announced that it will waive surcharges for the payment of tax in instalments by businesses and individuals facing difficulties in settling their tax bills.

On August 12, 2020, the IRD began issuing tax demand notes for the year of assessment (YA) 2019-20. The IRD said that taxpayers can, however, apply to pay their tax by instalments and should do so before the due dates stated on their demand notes.

Where taxpayers obtain the tax department's approval for an instalment settlement of demand notes issued between August 2020 and August 2021 for salaries tax, profits tax, and personal assessment for YA 2019-20, surcharges will be waived. This waiver will apply for a maximum of one year from the respective due dates of the demand notes, provided that the instalment plans are duly adhered to.

Finally, in the United States, while all eyes are on the forthcoming Presidential election, behind the bluster and bombast there are attempts to keep the business of doing business running smoothly, with the US Chamber of Commerce joining calls for the Treasury Department to issue clear guidance on the recently announced payroll tax deferral.

Earlier this month, President Trump signed an executive order requiring Treasury to defer the collection and payment of employee payroll taxes for the period September 1, 2020, until December 31, 2020. The deferral is available to employees whose wages or compensation was less than USD4,000 during any bi-weekly pay period, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.

Trump signed the order, bypassing Congress, after talks between Republicans and Democrats on a new COVID-19 tax bill stalled. Trump said in comments alongside the signing of the order that he would cancel the requirement to pay such amounts if he wins the US election scheduled for November 3, 2020. A subsequent announcement by Treasury Secretary Steven Mnuchin indicated that the payroll tax deferral would not be mandatory for employers to implement.

In a letter addressed to Treasury Secretary Steven Mnuchin, the Chamber warned that "without Congressional action to forgive the payroll tax, [the EO] threatens to impose serious hardships on employees who will face a large tax bill at the end of the deferral period."

In its letter to Mnuchin, the Chamber concluded:

"The Chamber appreciates recent reports that this EO will be optional but needs additional clarification about who elects this application. Further, there is uncertainty as to who is ultimately liable for the repayment of the deferred taxes, and when the repayment will be due and what mechanism will be used to collect that repayment."

Until next week!


About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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