Amid growing concerns about the coronavirus, the European Commission has called for solidarity and provided member states with a preliminary response that includes the suspension of some taxes.
On March 13 the commission announced measures it intends to implement, propose, or revise to lessen the major economic shock the pandemic is having on the EU. The list includes plans to increase the EU budget, introduce a legislative proposal to support member states seeking to protect jobs, and prepare a flexible legal framework for state aid rules. The commission also encouraged member states to take measures such as suspending corporate taxes and VAT payments.
The commission urged member states to work together rather than taking unilateral measures. President Trump has been criticized for acting unilaterally by imposing a ban on travel from European countries to the United States.
“The coronavirus pandemic is testing us all. This is not only an unprecedented challenge for our healthcare systems, but also a major shock for our economies," Commission President Ursula von der Leyen said in the March 13 release announcing the coordinated response. "We stand ready to do more as the situation evolves. We will do whatever is necessary to support the Europeans and the European economy.”
In the past few days, several countries have announced tax and other measures to mitigate the economic impact from the COVID-19 disease. In a March 13 release, Denmark’s Tax Ministry announced that the government has proposed an urgent bill containing four measures to give companies more time to pay direct taxes and VAT, among other things. If approved, the bill will take effect March 22.
Spain’s government is also helping its companies deal with the financial burden of the virus. According to a March 12 release by Prime Minister Pedro Sanchez, companies will have the option to either defer tax debt interest free or set up an installment plan to pay their taxes over the next six months.
In a March 12 release, Italy’s Revenue Agency announced that some tax-related assessments and checks will be suspended.
Pascal Saint-Amans director of the OECD's Centre for Tax Policy and Administration, told Tax Notes in an email that the OECD is working to identify tax measures that governments can take to handle the economic fallout from the spread of the coronavirus.
He also said the OECD is adapting its work methods in response to the coronavirus crisis as negotiations continue on a multilateral approach to update corporate tax rules for the digital age by the end of 2020, and that travel bans “do not change the dynamic at all.”
Airline Requests Heard
It appears that some governments are responding to a recent call by Europe’s largest airline association for a waiver or deferral of taxes on the aviation sector. The Norwegian government announced March 13 that a proposal to lift the air passenger tax until October 31, 2020, has been submitted to the Parliament.
Under the existing system, commercial passengers flying from Norway are subject to one of two ticket tax rates, depending on the destination. Individuals flying to airports in Europe pay NOK 76.50 (about $7.65), while those heading to other locations pay NOK 204.
Taxation of the aviation sector has been a hot topic in the EU. Finance ministers from nine European countries issued a joint statement November 7, 2019, urging the commission to introduce an EU-wide air passenger tax to help lower carbon emissions. The statement calls out the EU’s outdated energy tax directive and excise tax exemption on aircraft fuel, which Tax Commissioner Pierre Moscovici said needs to be amended. Under the directive, international aviation and maritime transport are not taxed, but domestic aviation and navigation are taxed in some cases.
Stephanie Soong Johnston contributed to this story.