Governments Get Creative Over COVID-19
Kitty Miv, Editor
21 May, 2020
Last week we delved into the indirect tax measures being employed by governments around the world in response to the current Coronavirus crisis. This week, in a slight change of pace, we'll be delving into a mixed bag of tax measures (you'll see!) starting with the tax amnesty proposal put forward by the Romanian authorities recently.
Under the scheme, those who had outstanding tax liabilities as of March 31 of this year will be given until December 15, 2020, to pay, with no penalties and interest payable so long as the debt is settled by this deadline. The tax amnesty will cover individuals, individuals in business, and legal entities.
Then on May 12, the Norwegian Government announced a revised Budget for 2020 which among other measures extended the option tax scheme for small start-up businesses and temporarily reduced employer social contributions.
The Government also proposed the introduction of a tax on the fisheries sector (see, I told you... mixed bag this week!), with a tax of NOK.040 to be imposed per kilogram of salmon, trout, and rainbow trout produced. The measure is planned to enter into force in January 2021, although it won't actually be payable until 2022.
The Norwegian authorities also submitted proposals to modify the tax regime for the oil and gas sector. These changes are intended to allow oil and gas extraction companies to deduct a higher proportion of their investment costs for tax purposes, among other changes.
In the UK, meanwhile, it seems that all options are under consideration for Chancellor Rishi Sunak once the immediate crisis has passed, with a smorgasbord of measures under consideration in order to boost the flagging economy. According to a report drawn up for the Chancellor recently, and reported on by the UK media, COVID-19 could create a hole of almost GBP300bn in the UK's public finances. The UK's Daily Telegraph, which first reported on the leaked proposals, suggested that the Government could be considering a combination of a one to five percent hike in personal income tax rates, changes to pension tax rules, a value-added tax increase, and a hike in social security contributions, among other measures.
Finally this week, we turn to the Netherlands, never a country which could be accused of lacking in ambition when it comes to matters tax and legislative, and which has unveiled proposals for wide-ranging reforms to the country's tax system.
Presenting 'Building Blocks for a Better Tax System' in a Parliamentary letter submitted to the House of Representatives on May 18, State Secretary for Finance Hans Vijlbrief unveiled plans to improve and "future-proof" the country's tax system.
The report is based on the results of 11 investigations into seven "bottlenecks" in the tax regime which lead to unfavorable outcomes. It suggests 169 "building blocks" that political parties could use in future to rebuild the tax system.
According to the Government, the seven bottlenecks include:
- A rising tax burden on labor;
- Tax complexity;
- Ineffective taxation of the platform and gig economy;
- Inconsistent taxation of capital, with some forms of capital income taxed more lightly than others;
- Inadequate taxation of profits;
- Insufficent "pricing" of pollution through taxation; and
- The declining effectiveness of national taxation.
Policy options detailed in the report are intended to better align the taxation of workers, the self-employed, and retirees; tackle tax avoidance; and simplify the tax system.
Additionally, the report proposes that the tax burden should be shifted from labor towards wealth, and that additional environmental taxes should be put in place, in particular targeting the aviation and energy sectors.
Further, the report suggests that a more harmonized European approach to the taxation of profits and environmental taxation could be more effective than national measures in these areas.
However, in recognition of the economic impact of tackling the COVID-19 virus, the report acknowledged that tax incentives and support measures may be needed in the short-term.
Until next week!
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