Facing The Crisis: The Role of Tax in Dealing With COVID-19

Proshare

Wednesday, June 17, 2020 / 04:29 PM / IMF/ Header Image Credit: Nomoretax

 

Proshare Nigeria Pvt. Ltd.


A joint blog first published on the PCT website by Vitor Gaspar, Director, Fiscal Affairs Department, IMF; Navid Hanif, Director, Financing for Development Office, UN; Ceyla Pazarbasioglu, Vice President, Equitable Growth, Finance and Institutions, WBG; and Pascal Saint-Amans, Director, Centre for Tax Policy and Administration, OECD


COVID-19 has already infected millions of people and claimed nearly half a million lives. The sudden halts in economic activity and employment are far worse than anything on record, in depth and speed. The economies of developing countries are being harmed by drastic but very necessary measures to protect people's health, and by cross-border disruptions in supply chains, tourism, remittances, and commodity prices. The poorest and most vulnerable segments of the population are always affected disproportionally during economic downturns. This is compounded during the current crisis as the poor have fewer options to protect their health and suffer more from disruptions in public services. Recovery will not be quick, and the future will differ in important ways from the reality of only a few months ago. In times of distress, people look to governments for information, direction and protection.


The current crisis is a global challenge that requires a global response. International tax cooperation must be part and parcel of a set of effective and well-coordinated multilateral actions to respond to the crisis. In order to expand the fiscal space, it is more urgent than ever to work together to fight tax evasion and tax avoidance, including illicit financial flows. At the same time, it has never been more important to move towards a fairer and more equitable taxation of economic activities at the global level. 


Taxation is profoundly affected by the pandemic. Covid-19 will change taxation-in at least three important ways, with lasting implications. First and most immediately, taxation plays a role at this current crisis stage in helping to sustain universal access to basic goods and services through "lifeline" measures. Vulnerability to COVID-19 and to its economic impact are very different across social groups. Taxation can help compensate for this uneven playing field-that is an additional argument for progressive taxation. In the same spirit, aggressive tax minimization by large taxpayers - however legal it may appear - will become even more intolerable to society at large. This increases the importance of, and attention to, the work on international corporate taxation now being carried on in the Inclusive Framework and the UN Tax Committee.


Proshare Nigeria Pvt. Ltd.

 


Second, as the economies of the world recover, taxation will also play a role. Developing countries are likely to see a significant decline in their average tax-to-GDP ratio in 2020.  This will have lasting implications-after the 2008-09 global financial crisis, it took an average of eight years for revenues to recover to their pre-crisis level. Clearly those countries with limited fiscal space going into the crisis will be hit harder than those that had greater flexibility on both the fiscal and monetary sides. Much direct international financial support and debt relief will be necessary during and after the peak of the crisis, and indeed considerable emergency financing is already flowing from both the World Bank and the IMF. But it is important that we do not lose sight of the imperative to support longer-term tax capacity building, and the importance of mobilizing revenues in the aftermath of the crisis. On the other side, taxation must play a role in future macroeconomic stimulus to regain growth.  Striking the appropriate balance will not be simple. Stimulus needs to be well timed and proportional with securing the additional revenues needed to restore fiscal sustainability once growth has been put on an upward path. Taxes will play a role in shaping the "new normal". Along with affecting equality, fundamental shifts in social behaviors make the aftermath of the crisis a good moment to "green" our tax systems.


Finally, the crisis brings even more importance to the fundamental work already being carried on by many lower income countries, with assistance from the PCT partners and other international providers, to reform and build governance capacity as part of the development process. Transparency, including the monitoring of domestic revenues, aid, and the spending of both, will be critical. For this group of countries substantial efforts to build tax capacity are central to a development strategy aimed at delivering on the Sustainable Development Goals.


The PCT Partners have been closely communicating at this difficult time: Policy Notes by the partner organizations have been linked and collated on the PCT website. Assessment and guidance through these notes by the partners have proven to be largely complementary. The PCT partners will continue their work together, including through exchange of views on analytic thinking on tax structures and the impact of changes on lower income developing countries.


COVID-19 opens opportunities for moving more decisively towards sustainable and inclusive growth. Progress and prosperity open to all peoples and nations is an ideal well worth pursuing.


Proshare Nigeria Pvt. Ltd.


Related News - World Bank IMF and Dev Agencies

  1. Nigeria: Technical Assistance Report - Additional Spending Toward SDG's
  2. Rebuilding Investor Confidence in Times of Uncertainty
  3. Global Economy Expected to Shrink by 5.2% in 2020 Due to COVID-19
  4. Johnson Chukwu To Speak On Developments Around AfDB Tomorrow On WebTV
  5. Adapting to Climate Change in Sub-Saharan Africa
  6. AfDB Unveils Strategy Roadmap to Safeguard Food Security Against Impacts of COVID-19
  7. AfDB Approves New Five-Year Strategy for Nigeria Amidst COVID-19 Concerns
  8. Safeguarding Africa's Food Security in the Age of COVID-19
  9. President Buhari to AfDB President, Adesina: I Will Stand By You
  10. Leadership of the AfDB: Concerned African Leaders Call for Caution
  11. Africa Confronts Its Destiny - AfDB Stands or Stays Cowed: Obasanjo and Ahmed Makes Case
  12. Halt Bank Dividends and Buybacks Now
  13. Dampening the Impact of Global Financial Shocks on Emerging Market Economies
  14. Making Economies More Resilient to Downturns
  15. Emerging from the Great Lockdown in Asia and Europe
  16. How Pandemics Leave the Poor Even Farther Behind
  17. Broad, Fast Action to Save Lives and Help Countries Rebuild
  18. HP, African Union Partner for Distance Learning in 55 African Countries During COVID-19
  19. State-Owned Enterprises in the Time of COVID-19
  20. Fiscal Policies for the Recovery from COVID-19

 

Proshare Nigeria Pvt. Ltd.


Related News - Taxes and Tariffs

  1. NCC and FIRS Sign MOU to Ascertain VAT Elements of Telcos' Transactions
  2. FIRS and New TCC Portal: Understanding the Inconvenient Truth of a Missing Portal
  3. FIRS Launches New TCC Application Portal
  4. FIRS' Public Notice on Regularisation of Tax Status of Dormant Companies
  5. FIRS Extends Deadline for Waiver of Interest and Penalty on Outstanding Tax Liabilities
  6. Finance Act 2019: Minister Clarifies the Meaning of Significant Economic Presence
  7. Yomi Olugbenro of Deloitte to Discuss Revised Tax Measures on WebTV Tomorrow
  8. The Finance Act 2019 Introduced an Amendment to the CITA to Tax a Foreign Entity
  9. Minister of Finance Issues Order on Significant Economic Presence by Non-Nigerian Companies
  10. FIRS Finance Act Circular: Amendments to the Stamp Duties Act

Proshare Nigeria Pvt. Ltd.
READ MORE:
Related News
SCROLL TO TOP