- Wage subsidy support measures
- Tax relief
- International tax
The Global Accounting Alliance (GAA) Tax Directors group haven’t been hindered by border closures following COVID-19 and recently met online to share experiences of COVID-19 responses around the globe.
Now that New Zealand is at level one, we have one of the most open economies in the world, albeit with closed borders. But in terms of our response New Zealand and many others are still in the ‘cushioning the impact” phase of COVID-19.
A common theme between GAA member countries is a wage subsidy scheme that emphasises keeping employees connected with their employer. New Zealand’s wage subsidy scheme is operating on a high-trust and unlegislated model. While the lack of legislation has given rise to several practical and technical questions for our members, the process for businesses to apply for and receive the subsidy has been relatively simple. Schemes elsewhere seem complicated in contrast, with longer periods before payments are received. Australia’s Jobkeeper scheme for example shares many similar features with our wage subsidy scheme but is paid to the employer monthly in arrears. The US’s largely outdated and paper-based revenue system could result in months long delays in processing support payments.
While our wage subsidy has been extended to support businesses as businesss begins to return to normal, other countries such as Scotland are slowly beginning to taper their schemes off. South Africa seems to have taken a different approach altogether and have looked to recovery almost from day one with a number of debt relief funds and other business financing packages being utilised.
But have the various COVID measures worked as intended? Time will tell, and the significant fiscal costs of the schemes may come back to bite if businesses receiving the wage subsidy aren’t sustainable long term.
Between the GAA countries, ways of reducing tax burdens during COVID have differed significantly. Ireland has warehoused various taxes for up to 12 months, some Australian states have allowed for payroll tax deferrals and Canada has waived penalties and interest for late filed individual tax returns. But deferred tax either needs to be paid or written off eventually and being hit by an extra years tax obligations could make recovery difficult. New Zealand’s approach is arguably broader than others, with significantly impacted taxpayers able to apply for interest and penalty remission for any tax type once the core tax has been paid or waived. This provides greater flexibility for taxpayers and ensures only those taxpayers who are severely impacted don’t pay on time.
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Many countries around the world are grappling with the tax implications of foreign tax residents being stuck within their borders due to border restrictions. These issues could take a long time to resolve without clear and certain guidance. New Zealand has taken a pragmatic approach where individuals, company directors or employees have been stranded in New Zealand as a result of COVID-19. The OECD has also recently issued guidance concerning international tax treaty rules and the response to the COVID-19 emergency. The OECD considers that a company’s place of effective management will not change because of the displacement of senior executives. The OECD does not consider that the current emergency will change how a permanent establishment is determined.
The Global Accounting Alliance Tax Directors Group
The GAA Tax Directors Group comprises the Tax Directors from each of the constituent bodies, who are central to advocating the views of the tax profession and to disseminating best practice. The group maintains a close working relationship through regular conference calls and meetings when they share views and experiences on the latest developments and challenges facing the global tax profession.
Meetings usually take place in the countries represented by the GAA to facilitate meetings with the local tax authority, government representatives and representatives of the locally based major firms to better understand the administration of tax systems in different jurisdictions and of international tax issues as they play out in a specific country. These meetings enable real-time sharing of information and enhance the standing of the GAA.
The GAA Tax Director Group is one of the only tax-dedicated bodies providing a global voice on tax for the accounting profession. The group works globally to ensure that the work we do in our individual countries is better informed and better focused.
The most recent Tax Directors Group meeting was held in New Zealand late last year. While in New Zealand the group met with senior officials from Inland Revenue and Treasury, Ministers and senior tax experts.