Tax policy reforms 2021 : special edition on tax policy during the COVID-19 pandemic

Foreword Executive summary Scope of the report Key economic and tax policy trends Way forward Notes 1 Macroeconomic background 1.1. The COVID-19 crisis has been large and widespread 1.2. The recovery has been rapid in some sectors but lagged behind in others 1.3. The labour market has shown some resilience but could be affected in the longer term 1.4. Fiscal policy has played a major role during the crisis 1.5. The outlook highlights the risk of divergence across economies 1.6. Prospects for a full recovery depend on restoring consumer confidence 1.7. Headline inflation receded during the crisis but cost pressures have recently increased References 2 Update on the tax measures introduced during the COVID-19 crisis 2.1. Overview of tax measures during the COVID-19 pandemic 2.2. Corporate income tax and other business tax measures sought to provide relief to businesses and encourage investment Tax payment deferrals and tax filing extensions Reduction of tax prepayments Tax refunds Tax waivers and rebates CIT and other business tax rate reductions Tax support for employment Other liquidity support measures Enhanced loss offset provisions Tax incentives for investment CIT and other business tax increases International tax measures 2.3. Personal income taxes and social security contributions were used to provide relief to households and employers, but several countries also raised tax rates on high earners Tax payment deferrals and other PIT administration measures Extended or new personal income tax allowances and credits PIT rate changes and tax threshold changes Social Security Contributions (SSCs) 2.4. Value added tax measures and other consumption tax changes were primarily aimed at easing liquidity pressures on businesses and encouraging consumption Tax payment deferrals Acceleration of VAT refunds Bad debt relief regimes Tax filing extensions and other simplification measures VAT/GST rate changes Collection of VAT/GST on online sales by non-resident vendors and platforms Excise duty changes Import and export duties 2.5. Environmentally related taxes continued to be raised in a number of countries, but were lowered in some Energy taxes Vehicle and other transport taxes Other environmentally related taxes 2.6. Property taxes were reduced in some countries to address liquidity concerns, while others increased them to meet growing revenue needs Business property taxes Recurrent taxes on residential property Property transaction taxes Net wealth taxes References Notes 3 Way forward 3.1. In the short run, a careful approach to tax relief and stimulus is needed Emergency tax relief: increased targeting and careful withdrawal Avoiding the premature withdrawal of relief and extending cash flow and income support measures where needed Progressively replacing blanket measures with more targeted support Avoiding “cliff edge” effects Carefully enforcing and monitoring relief measures Pursuing well-designed stimulus Getting the timing right Ensuring that stimulus is temporary Targeting stimulus to areas where equity needs and fiscal multipliers are highest Prioritising measures that support employment Considering measures to encourage business recapitalisation Aligning stimulus with longer term environmental, health and social objectives Tailoring stimulus to countries’ specific circumstances Coordinating tax stimulus with other policies Coordinating tax stimulus across countries 3.2. In the medium run, tax and spending policies should be reassessed References This report provides an overview of the tax measures introduced during the COVID-19 crisis across almost 70 jurisdictions, including all OECD and G20 countries and 21 additional members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. It examines how tax policy responses have varied across countries and evolved over the last year. It also offers some guidance as to how tax policy responses could be adapted to address the short-term challenges countries face and outlines future work that the OECD will be undertaking to help countries reassess their tax and spending policies in the longer run The report provides an overview of the tax measures introduced during the COVID-19 crisis across almost 70 jurisdictions, including all OECD and G20 countries and 21 additional members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. It examines how tax policy responses have varied across countries and evolved over the last year.