The OECD decided to move beyond earlier prepared recommendations on actions in tax policy and tax administration in view of COVID-19, and published report “Tax administration Responses to COVID-19: measures taken to support taxpayers”. The report is drafted by the Forum on Tax Administration.
The OECD conducted the first screening of measures taken in countries, and plans to update this "alive" document as policies of the OECD member-countries and the organization’s partners are get upgraded.
OECD invites countries to pay attention to the following aspects:
- Measures may be applied in accordance with targeted approach and only apply measures to taxpayers that are the most affected by Covid-19 (depends on sectors / segments such as sub-sets of the self-employed or small businesses:). The key question is how to correctly identify the groups of taxpayers most affected by the situation.
- Measures may be applied to all taxpayers, or all taxpayers within particular segments such as individuals, self-employed, SMEs and large businesses. Such an approach can be simpler but less effective as targeted approaches.
- It’s important to analyze the consequences which might arise for taxpayers from tax administration actions. For example, decisions to defer tax reporting may have impacts on refunds.
- The duration of measures. On the one hand short term measures may not provide the extent of certainty that some taxpayers would like to see in financial issues. On the other hand, longer term measures may, though, store up problems for the future making it more difficult for taxpayers to return to normal conditions.
- The possibility of fraud. Some measures may be particularly vulnerable to fraud, for example where someone sets up a new company with fictitious staff and seeks government support.
- How to make options available to the digitally challenged (or example because of age).
Currently, the OECD identifies the following types of measures:
1. Additional time for dealing with tax affairs
Extension of deadlines. In many countries, the Covid-19 outbreak falls within the period in which income tax return filing and payments are due. Deadlines could be pushed out by several weeks or months, to provide individuals and businesses impacted by Covid-19 with additional time to file their tax returns and related forms as well as to make tax payments. This could either be automatic or on request in a simplified format (e.g. email, phone). This may be particularly important where taxpayers require the assistance of intermediaries or specialised staff and systems to file returns. Remote working may make this impossible for some taxpayers, for example for system security and access reasons. Similar measures were taken in Australia, Belgium, Brazil, Canada, China, etc.
Deferral of payments. The Covid-19 outbreak has an unprecedented impact on the cash-flow situation of many individuals, who may for example be laid-off temporarily from employment or who have to take unpaid leave. For many businesses (especially SMEs, self-employed,) the down-turn in economic activity will also have severe consequences. Shops are being closed, the number of customers may be reducing significantly, contracts may be terminated, supply chains interrupted. At the same time those businesses continue to have regular expenses such as rental of business space, etc. Tax administrations could consider deferral of payments. Such measures have already been taken in China, Denmark, Germany, Italy, etc.
Remitting penalties and interes. Taxpayers are experiencing great stress due to fears of violation of tax laws and the inability to pay taxes on time. Tax administrations may consider to suspend penalties or interest, particularly where extensions of deadlines are granted. Appropriate measures are provided for in France, Georgia, Israel, Netherlands, USA, etc.
Easier access to debt payment plans and extension of plan durations. Taxpayers who owe tax debt often have the option of entering debt payment plans, though this may be with some conditions for entry into those plans. OECD recommends tax administrations to consider where appropriate could be to give easier access to both payment plans and to extensions of plan durations. Consideration may also be given to having an interest free period. Special measures have been taken in Belgium, Finland, UK, etc.
Suspending debt recovery. Suspending debt recovery can have severe impacts on some taxpayers in current circumstances and can include spending the garnishing of wages or bank accounts and asset seizures and sales. Appropriate measures have been taken in Argentina, Germany, Ireland, Korea, etc.
In Russia there are proposals to provide taxpayers with additional time to resolve tax issues:
- Dates for tax payment of all taxes, except VAT and income tax, are postponed for 6 months for companies and private enterpreneurs. included in the SME register, and for 3 months for the other enterpreneurs, not included in the SME Register.
- Dates for payment of insurance contributions for entities according to the list of main types of economic activity are postponed by 6 months for microenterprises. The list of industries is approved by the Government Commission for sustainability enhancing of the Russian economy.
- The application of collection measures are suspended till the 1st May 2020 for taxpayers included in the unified register of SMEs engaged in the tourism and air transport industries, for business entities engaged in the fields of physical culture, sports, art, culture and cinematography, and other industries that have been most affected by the deterioration of economic environment due to the spread of the new coronavirus infection, to provide priority targeted support.
2. Quicker refunds Where taxpayers are owed money, processes for refunds might be prioritized to ensure that money is paid out quickly, particularly where the amounts involved may have significant impacts on financial situation of the taxpayer. According to the OECD, tax administrations can also minimize the burden by reducing inspections. Corresponding measures are provided for in Australia, China, Israel, etc. In Russia, currently there are no provisions for changing refunds.
3. Audit policies and tax certainty Of course, on-site inspections carry not only financial risks for taxpayers, but also health risks for both tax inspectors and company employees. The OECD believes that a temporary change in tax audit policies could be considered. This can be done by adopting a common policy or by changing risk criteria. At the same time, it is important for the tax authorities to assess key risks, in particular, the risk of fraud (for example, with the involvement of employees or pension contributions).
The Federal tax service of RF suspends on-site tax inspections till the 1st May 2020. The FTS postpones inspections of users of online cash registers, as well as control measures on compliance with currency legislation and on state-regulated activities in gambling and lotteries for all categories of taxpayers, including small and medium-sized enterprises. On-site inspections that have been started earlier are also suspended. Uncompleted inspections of use of cash registers and compliance with currency legislation, as well as incomplete proceedings on administrative violations will be carried out without direct contact with taxpayers - via telecommunication channels, by means of the taxpayer's personal account, by mail. Russia has introduced the moratorium on inspections of SMEs, including tax inspections, except for situations of risks to the public life and health. In the current situation, it is important for the Federal tax service to determine the key criteria of abuse risks.
4. Enhanced services and communication initiatives In recent years, many tax administrations have expanded the use of digital communication channels, including the possibility of exchanging messages using web chat, social networks, mobile applications, etc. Digital solutions can help reduce physical contact (for example, through the tax authorities) and help speed up the response to taxpayers. The OECD recommends creating separate web pages, hotlines for taxpayers (possibly with call-back facilities), etc. Steps aimed at improving the quality of services for taxpayers have been taken in many jurisdictions (for example, Austria, China, Singapore, etc.). The Federal Tax Service also reacted quickly to the situation by creating a special page dedicated to COVID-19.