Why monitoring COVID-19 response measures is key

The magnitude of COVID-19 response measures in the tax area is mind boggling. EY has identified 98 jurisdictions that have introduced measures - and counting. Yet many jurisdictions need to elaborate announced measures and implement application procedures to ensure that the measures reach businesses and individuals. Close monitoring of the COVID-19 response measures is therefore key from two perspectives.

First there is the perspective of whom the measures concern directly – taxpayers. Monitoring tools and services like the EY Tax COVID-19 response tracker will help to stay abreast of the rapid developments and obtain direct access to documentation and advice. Over time, it will also allow businesses to identify trends and to develop scenarios for adjusting tax strategies in this new environment.

Monitoring COVID-19 responses is equally important for policy makers and tax administrators. The work of international organizations like the OECD enables peers to identify best practices. Identification of best practices and other forms of international coordination will be equally important for the stage of recovery. After all, coordination would enhance the effectiveness of response measures by avoiding that taxpayers get caught in a web of uncoordinated policies and measures.

Unfortunately we are still far away from the recovery phase. One trend that emerges from the first wave of measures is the objective to safeguard businesses against cash shortages. We have seen tax administrations around the globe extending deadlines, defer payments dates and remit penalties and interest. For many taxpayers this will help to ensure the short-term continuity of the business. For the longer term one may wonder whether tax administrations are best placed to provide liquidity to businesses. Are their processes capable for dealing with large number of requests? And what will the increase of tax debts mean for other creditors that do not enjoy the same priority?