Countries around the world continue to implement emergency tax measures to support their economies during the coronavirus (COVID-19) crisis.

Providing tax relief to the people and companies that are most affected, until the emergency abates, is welcome. Countries should consider tax relief measures because the health issue is creating a substantial economic shock. Taxes that require regular payments will impact the liquidity of businesses and households.

Therefore, governments should consider fiscal relief as a way of minimizing the economic impact from the health crisis.

As policymakers navigate this crisis, they should hue to the following principles:

  • Tax relief should be broad-based.
  • Tax relief should be in keeping with good long-term policy. Distorting markets today will undermine the long-term recovery.
  • Using refundable tax credits today should be designed to bring forward future credits or deductions.
  • Policymakers should also use this opportunity to fix distortive tax policies that could impede recovery efforts.

United States Coronavirus Tax Relief

The United States has adopted a short-term expansion of paid sick leave. Tax payments have also been delayed from April 15 to July 15 without interest or penalties. The CARES Act legislation provides a $1,200 tax rebate for individuals and $2,400 for joint filers, with an additional $500 per child. Among many tax measures for businesses, the act includes a refundable payroll tax credit and allows employers to delay paying Social Security payroll taxes, with half-payment due December 31, 2021 and the rest due December 31, 2022. Also, $150 billion in relief funds will be distributed among the states.

Unemployment insurance payments have been increased and $450 billion in forgivable loans have been extended to small businesses to support payroll costs.

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