The implications for tax following COVID-19
Amid the current economic climate, it is clear that we need to think-through the implications for tax and the Global Responsible Tax Project (GRTP) of COVID-19. The virus and government, corporate, social and personal responses to it are impacting on everyone, everywhere. The short, medium and long term implications for tax might well be dramatic.
Governments are making decisions now on how to use the tax system to help businesses, people and workers throughout the course of this situation. Tax holidays and deferrals have been applied in a variety of ways in different countries. The length, nature and targeting of such breaks are being debated over a number of points. For instance, should governments be trying to favor certain sectors in either the short, medium or long term? Should the environment be a big factor in any public investment decisions?
How can medium and long term defecits be reduced?
Clearly, government expenditures are going to increase dramatically, at least in the short term. Even though borrowing costs may be low in historical terms – at least for some governments - at some stage in the medium to longer term deficits will have to be reduced. How governments seek to do this and when remains to be seen, especially when they will be likely seeking to prioritize economic growth.
The implications in the medium to long term for corporate taxation, personal taxes, VAT, green taxes and much else could well be profound. But with such uncertainty predicting outcomes is not possible. There will be calls for higher taxation to pay off deficits and maybe to increase public services like health and social security going forward. Where will the burden fall and how will this be balanced by calls to keep taxes low to stimulate the economy? Will the COVID-19 situation lead to a radical rethink about what we tax and how to tax – perhaps aimed at supporting what are considered more sustainable business models and societies more resilient to shocks?
The impact of the Global Responsible Tax Project
The GRTP will be using its networks, experience and approach to draw together a range of different global tax voices and responses to COVID-19, so that governments, companies and stakeholders can benefit from an overview of policies being enacted.
We are currently arranging a series of online roundtables bringing people from a wide range of areas together from across the globe to look separately at thoughts and ideas on the complicated topic of the implications and role of tax in the crisis over time.
If you would like more information on this project, or get involved, please contact Robert Phillips.