COVID-19 Trends Take Shape In The New 'Wild West'
Kitty Miv, Editor
17 April, 2020
As we've alluded to previously, there are a number of common themes and threads starting to emerge from the responses to the COVID-19 pandemic over recent months (years? One loses track...), both on the broader international stage, and at a more fine-grained national level.
Last week we discussed the efforts being made by several countries to support the manufacture and importation of PPE (Personal Protective Equipment) and medical supplies, looking especially at the tax efforts being made by Romania and Poland, which were reducing or removing VAT rates on such supplies.
This week, there is more of the same elsewhere in the world, for example in the Philippines, where the authorities recently announced that the country would exempt imports of medical equipment and supplies intended for frontline healthcare workers from various taxes and duties.
The exemptions, which take in VAT, excise tax, duties, and fees, are to cover imports of personal protective equipment, COVID-19 test kits, medical and laboratory equipment and devices, consumable medical supplies, medicines, and other supplies as identified by the Department of Health.
In what could be viewed as something of a drop in the ocean, considering the parlous state of the country's healthcare system even before the Coronavirus crisis, Venezuela also announced that it has exempted from value-added tax, import duty, and customs duty imports of medical equipment necessary for tackling COVID-19.
The measure was included in Presidential Decree No. 4,166, which was published in the Official Gazette on March 17, 2020.
A number of Venezuelan municipalities have additionally announced tax relief measures for taxpayers, including tax payment and filing deferrals.
Estonia and Latvia took a slightly different tack, with the Estonian Government on April 10 proposing income tax exemptions for donations made to hospitals and other such bodies.
According to the Government, the exemption will apply to donations and gifts to support efforts at corporate hospitals, welfare institutions and state and local government agencies. Normally, donations can only be made tax-free to non-profit associations and foundations that operate in the public interest and which are charitable.
In Latvia, meanwhile, the Government this week approved a Ministry of Finance proposal to exempt donations intended to help prevent the spread of the virus from corporate tax.
Under the plans, the corporate tax exemption will apply to donations of goods and services to entities directly affected by the virus, including companies, associations and foundations. The exemption would apply from the start of the state of emergency until the end of 2020.
Both sets of measures need to be approved by the respective national Parliaments before they can enter into force.
So much, then, for the measures that appear so far to be acting as intended, and for which the aims are relatively clear and unambiguous; being either to support the country's health system and its medical profession in battling the pandemic in the case of tax support for PPE, sanitary and food supplies and medicines, or to prevent various sectors of the economy from collapse or near collapse, and to ensure that taxpayers have – at some point – the means to spend again.
However, what of the law of unintended consequences, especially with regard to the digital economy? The OECD could give you chapter and verse on this issue, having just about caught up to the world in terms of taxing such activity in its Action plan point on taxation of the digital economy.
As always seems to be the case though, just as governments and multilateral bodies lumber up to business, hands out for payment, the latter sprint off again. This may yet prove to be so again in the immediate aftermath of the pandemic, during which so many services have gone online only through necessity, and the provision of which is likely to remain solely digital for some time afterwards.
How best to properly tax the intermediary in a service provision transaction, especially when such an entity may not be based in your taxation location...? How to establish whether there's an establishment to tax, when established (permanent) establishment rules have been, well, dis-established? These, and other such conundrums, are likely to present a taxing puzzle in both the near and medium term.
And this is all to say nothing of the somewhat unexpected – while at the same time, entirely predictable – development of a kind of trade war between countries over access to the supplies of essential protective equipment, ventilators, and medical supplies that are being produced. With many of the traditional producers of such goods under attack from the pandemic themselves, and reserving supplies for their own populations, it seems to be a case of every country for itself, rather than what is needed, which is the presentation of an united front in the face of a new and unprecedented threat.
That border skirmish, and the possible unintended consequences, however, is an issue for another column. And with that, we leave the tax and digital Wild West for this week...
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