COVID-19 and Taxation : Between the Devil and the Deep Blue Sea
The objective of this working paper is to provide guidance on the dilemma that governments are facing because of the economic crisis triggered by COVID-19. Measures adopted by governments during the contention phase to alleviate cash flow pressures...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/908111619060497697/COVID-19-and-Taxation-Between-the-Devil-and-the-Deep-Blue-Sea http://hdl.handle.net/10986/36155 |
| Summary: | The objective of this working paper is
to provide guidance on the dilemma that governments are
facing because of the economic crisis triggered by COVID-19.
Measures adopted by governments during the contention phase
to alleviate cash flow pressures on taxpayers require budget
expenditures that exacerbate revenue losses from reduced tax
bases. In parallel, governments are struggling with public
expenditure needs that call for creating fiscal space.
During this crisis there has been a significant increase in
digital transactions as well as an acceleration of digital
economy business models and trends. As a result, new income
sources have appeared, and governments must find ways of
taxing them. The first part of this paper provides guidance
on practical measures that may be applied by tax authorities
to strengthen cash management and alleviate cash flow
constraints on taxpayers. Most of these measures are
applicable primarily during the contention phase of the
COVID-19 health and economic crisis, but there are others
well positioned to support the recovery phase. This paper
elaborates on some of the recommendations profiled in the
‘Revenue Measurements on Tax and Customs’ document produced
by the Fiscal Policy and Sustainable Growth unit,2 which
serves as the umbrella document for this one. The main scope
of this paper is to further develop specific practical
measures for improving the cash management of businesses and
households faced with liquidity constraints during this
period. It also provides recommendations to revenue
administrations for improving compliance and receipt
monitoring during the contention phase. The second part of
this paper focuses on post-crisis measures that may
compensate for the fiscal deficit generated by cash flow
management and temporary tax relief measures. This paper is
a continuation, from a cash flow management perspective, of
previous World Bank Group research conducted in the areas of
fiscal policy and revenue administration implications in
response to the COVID-19 pandemic. |
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