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Tax relief in a time of crisis: what countries are doing to sustain business and household liquidity

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Governments around the world are offering tax relief to address the problem of liquidity for households and businesses and to brace for the economic slowdown precipitated by the coronavirus (COVID-19) pandemic . The Paying Taxes indicator in Doing Business monitors tax reform trends across countries, with a view to keeping governments informed about fiscal reform efforts, and offers an overview of global efforts. 

To date, 105 countries have implemented tax relief to curb the economic fallout from the pandemic , according to the International Monetary Fund, PwC, Tax Foundation and OECD crisis trackers. Measures fall into several categories, defined by type of tax affected -- personal, business, or consumption -- or by type of action undertaken -- deadline extension, payment deferral or waiver, rate reduction, or refund acceleration (table 1).

Table 1. Types of tax measures around the world 

Tax relief measure Countries Examples
Extension of deadline for filing and payment of taxes Belgium, Bosnia and Herzegovina, Bulgaria, Colombia, Egypt, Greece, Kazakhstan, Malaysia, Peru, Qatar, Saudi Arabia Egypt allowed a three-month extension for the payment of property taxes for companies in the industrial and tourism sector.
Deferral of tax payments Austria, Australia, Belgium, Brazil, Canada, China, Germany, Jordan, Lebanon, Madagascar, Turkey, United Kingdom, United States Turkey provided the retail and transportation sectors a six-month tax deferral.
Exemption, suspension or reduction of labor taxes and mandatory contributions Argentina, Australia, Brazil, China, Italy, Jordan, Cabo Verde, Malaysia Malaysia exempted employers in all sectors from the Human Resources Development Fund levy for a period of six months effective from April 2020. Malaysia also temporarily reduced the employees’ portion of the Employer Provident Fund (EPF) statutory contribution rate from 11% to 7%.
Faster or extension of VAT/GST refunds Australia, Cabo Verde, Canada, China, Chile, France, Indonesia, Kenya, Luxembourg, Romania Luxembourg announced that authorities will refund all VAT balances under EUR 10,000.
Reduction in or exemption from VAT rate and custom duties Bolivia, China, Colombia, Costa Rica, Greece, Italy, Republic of Korea, Malaysia, Peru, Turkey, South Africa Costa Rica exempted VAT on rentals used for commercial purposes for April, May and June 2020.
Waiver of late payment surcharges and penalties surcharges and penalties Austria, Australia, Belgium, China, Estonia, Ukraine Estonia has suspended the calculation of interest on tax arrears from March 1, 2020 to May 1, 2020. 
Expanding tax incentives Austria, Australia, China, Malaysia, New Zealand Australia is allowing accelerated depreciation deductions for a 15-month investment incentive period (to June 30, 2021).
Deferral or suspension of tax audits Austria, Kazakhstan Kazakhstan suspended desk audit notifications and the commencement of planned tax inspections until the announced emergency term (i.e. until April 15, 2020). 

Source: International Monetary Fund (, PwC (, Tax Foundation (

The extension of payment deadlines has been the most widely adopted tax relief measure around the world.  In Australia, individual taxpayers are eligible to apply for a deferral of payment of their tax liability for up to four months without incurring interest or penalties. This applies to personal income taxes, goods and services taxes (GST), fringe benefit taxes, and excise taxes. Belgium has implemented automatic deferral for two months of payments of value-added taxes (VAT), corporate income taxes and personal income taxes. Chile delayed corporate tax payments, VAT, and personal income tax payments until June 30. Bosnia and Herzegovina and Bulgaria have also extended the deadline for submission of the corporate income taxes until June 30. Madagascar deferred the filing and payment of the Synthetic Tax until May 15. Nigeria extended the filing date of corporate income tax returns by one month and allowed taxpayers to file returns using unaudited accounts. Taxpayers must then submit audited accounts within two months.

Some countries have waived the employer’s share of payroll taxes or social security contributions as a way of enhancing cash flow for businesses and individuals.  China has waived employer contributions to employee endowment insurance, unemployment insurance and employment injury insurance.These waivers are in place for five months for small enterprises and for three months for large businesses. Brazil waived employer contributions to the unemployment severance fund until end-June. Montenegro deferred the payment of social security contributions for up to 90 days. 

A third group of countries provided measures that allow for quicker tax refunds, especially for VAT/GST input credits.  Thailand has accelerated refunds of excess VAT input to be made within 15 days online or within 45 days when applying at tax branch offices. Saudi Arabia has also accelerated refunds for excess VAT inputs. Latvia reimburses excess VAT input refund claims within 30 days and allows excess VAT input credits that have been carried forward from previous periods. 

A fourth set of policies - mostly manifested in VAT reductions - are intended to limit the collapse in consumption.  Greece cut the VAT rate from 24% to 6% for medical products. Turkey reduced the VAT rate from 18% to 1% for domestic air transportation. Norway decreased the VAT rate from 12% to 8% for cultural and touristic services. Kenya announced the reduction of the VAT rate from 16% to 14% effective from April 1. In South Africa, a list of essential goods will be subject to a VAT exemption and a full rebate of customs duties on importation.

In some countries, tax incentives have been offered to boost investment.  Indonesia has granted an exemption from import taxes for manufacturing companies and has provided a 30% discount on corporate income taxes. Malaysia has implemented accelerated capital allowances for machinery and equipment, a tax deduction of up to RM300,000 (about $74,257) for renovation and refurbishment costs and import duty and sales tax exemptions for machinery and equipment used in port operations. New Zealand introduced accelerated depreciation deductions for commercial and industrial buildings, including hotels and motels. 

The focus of these tax relief measures has been to improve business liquidity. Governments may soon shift from crisis response to fiscal consolidation to rebuild confidence. That transition will call for yet another set of policies.  



Simeon Djankov

Senior Fellow, Peterson Institute for International Economics

Joanna Nasr

Private Sector Development Specialist

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