Tax Policy Should Reflect Past-Crisis Lessons, IMF Official Says

Countries should consider new tax measures that limit the potential for business failures while taking into consideration that the coronavirus outbreak will likely reduce overall tax compliance, said an IMF official.

“Bear in mind evidence from past crises—both global, regional, and individual country crises—is that tax compliance declines during these crises,” Vicki Perry, deputy director of the Fiscal Affairs Department at the International Monetary Fund, said Tuesday at the Bloomberg Tax Forum.

• Governments should also revise their estimations of revenue collection to reflect the likely outcome, rather than base estimates off collection data from previous years, she said.
• Measures that would reduce compliance pressure and restore liquidity to companies could include special arrangements for taxpayers with cash flow issues, reduced interest rates, waiver of tax underpayment penalties, and expedited refunds, Perry said.
• “Ideally, move the tax system in directions that would be desirable anyway,” she said, citing environmental taxes as a means to raise revenue.