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Governments Working Hard On Working Hard

Kitty Miv, Editor
07 May, 2020

As things currently stand, after several months in which the COVID-19 pandemic has cut a painful swathe through the global population, and taxed the various health services to their limits, each country around the world is at a different stage in its Coronavirus journey. Some – for example the United States – are seemingly yet to reach the peak number of daily infections, while others, such as Italy, are cautiously emerging from lockdown. (A few, New Zealand being one such, seem to have avoided the worst of the immediate effects of the pandemic, perhaps due to a combination of timely government action, geographic location and population density...)

However, a common thread between all countries is the pressing need to restart their economies. And so, this week, we will be looking at what governments are doing to get their workers back to work, and how they have been supporting them whilst they have been unable to do so.

Least but not last, then, as a jurisdiction which doesn't traditionally get much coverage in this column, Jersey recently published further details of Phase 2 of its Co-funded Payroll Scheme (CFPS), introduced to help businesses, charities, and self-employed people disrupted by the coronavirus pandemic.

CFPS is an emergency scheme which aims to maintain employment in industries severely affected by the public health restrictions introduced in March 2020. Under Phase 1 of the scheme, businesses could claim CFPS for disruption caused between March 20 and March 31, 2020.

Under Phase 2, in April, May, and June 2020, the Government will refund employers, including charities, up to a maximum of GBP1,600 per employee, per month, equivalent to 80 percent of a worker's salary up to GBP2,000. The funding is available to employers who continue to pay their agreed wages in the usual way and who can demonstrate a drop in turnover of at least 30 percent in the month due to COVID-19.

Fellow Channel Island, Guernsey also revealed that it would be boosting its Coronavirus Payroll Co-funding Scheme for the businesses worst affected by the economic impact of the outbreak, expanding the scope of the scheme.

In late March, the Guernsey Government had stated that the initiative would fund 80 percent of employee wages, and in April, the Government extended the scheme to self-employed individuals.

As of May 4, 2020, businesses that see their turnover reduce to below 40 percent of normal levels will be able to apply for up to 100 percent of the minimum wage for employees through the Payroll Co-funding Scheme. This upper turnover threshold will be extended to 50 percent for those businesses most in need and able to demonstrate that support is still necessary. The scheme has also been extended to June 3; it was first put in place in March 16 and was originally set to last for 13 weeks.

Then, in an update on the COVID-19-related tax relief measures available to businesses, the German Finance Ministry announced that a regulation is being prepared to temporarily reduce the rate of value-added tax in order to assist the catering sector, and hopefully permit it to remain afloat in the new socially distanced era of eating out.

Under the proposal, food supplied in restaurants, cafes, and similar outlets will be taxed at the seven percent reduced rate.

Currently, food supplied for consumption on catering premises is subject to VAT at the 19 percent standard rate, while supplies of takeaway food are taxed at the seven percent reduced rate. The measure is expected to apply from July 1, 2020, until June 30, 2021.

Ireland, meanwhile, moved into the next phase of its Temporary Wage Subsidy Scheme (TWSS), which will now operate on the basis of an individual employee's average net weekly pay.

The TWSS was introduced on March 26, 2020. Under the transitional phase, the TWSS provided a maximum of EUR410 per week in respect of eligible employees, regardless of whether the employer made an additional payment to the employee's earnings or not.

On May 4, 2020, the TWSS moved into the "Operational Phase" and will now operate on the basis of an eligible employee's Average Revenue Net Weekly Pay (ARNWP) for January and February 2020, and the gross pay as reported by their employer in the payroll submission, subject to the maximum weekly tax-free amounts.

Finally, last but not least, in the United States, guidance was released for employers on the scope and application of the COVID-19 Employee Retention Tax Credit.

The Internal Revenue Service issued a set of frequently asked questions and answers to clarify the rules surrounding the Employee Retention Credit scheme under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The CARES Act, signed by President Trump on March 27, 2020, provides for a refundable payroll tax credit equal to 50 percent of up to USD10,000 in wages paid by employers to employees during the COVID-19 crisis.

The credit is available to all employers regardless of size, including tax-exempt organizations with two exceptions: state and local governments and their instrumentalities, and small businesses who take small business loans.

Until next week!

Tags: Government

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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