On 21 March, the OECD has published a list of tax measures that governments can take to alleviate the impact of COVID-19 on taxpayers. The suggestions of the OECD range from waiving or deferring employer and self-employed social security contributions, payroll and taxes to providing tax concessions for workers in health and other emergency-related sectors. Furthermore, the OECD recommends VAT measures such as deferring payments of VAT, customs or excise duties for imported items; speeding up refunds of excess input VAT; simplifying procedures for claiming relief from VAT on bad debts. On company tax, the OECD suggests to increase the generosity of loss carry-forward provisions and to defer or adjust the required advance payments of business income taxes on the basis of a revised expected tax liability that more closely approximates the taxpayer’s likely final tax liability, taking into account the expected impact on business turnover (instead of using last year’s sales or profits as a proxy).
During the last couple of weeks, the EU institutions have approved economic measures to support SMEs during the COVID-19 emergency. On 26 March, the European Parliament has approved the Regulation proposed by the European Commission as regards specific measures to mobilise investments in the health care systems of the Member States and in other sectors of their economies in response to the COVID-19 outbreak. These measures are meant to channel €37 billion from available EU funds to citizens, regions and countries hit the hardest by the Coronavirus. The European Regional Development Fund “should support the financing of working capital in SMEs where necessary […] to provide an effective response to a public health crisis”. In the meantime, the European Investment Bank (EIB) has decided to mobilise €40 billion to the impacted SMEs through various products available to financial intermediaries (commercial banks, national promotional banks, guarantee institutions). These measures complement those already taken by the Commission regarding the temporary framework for State Aid rules which enables Member States to use the full flexibility foreseen under State aid rules to support the economy at this difficult time.
Among the interesting data included in the "Tax policies in the European Union 2020" survey, the following graph shows the structure of taxation by economic function, illustrating the variation between EU Member States. The design of Member States’ tax systems differs according to tax rates and what activities are taxed. The survey remarks the need for sustainable tax systems coming from tax bases that do not erode and secure sufficient funding for current spending. Furthermore, sustainable tax systems are those that generate public consent and thereby legitimise the underlying social contract. This includes ensuring fair burden-sharing and tax compliance.
