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Law360 (April 23, 2020, 8:49 PM EDT) -- Countries should consider waiving and suspending taxes to speed stimulus programs helping small and medium-size businesses respond to the economic slowdown caused by the novel coronavirus pandemic, the International Chamber of Commerce has said.
The Paris-based group issued two statements Tuesday outlining short-term actions, such as waiving corporate tax payments, and midterm policies including avoiding unilateral taxes on international trade, such as digital service taxes.
"As countries consider a broad range of policy tools to effectively respond to the crisis, the ICC [statements serve] as a best-practice guide against which governments can benchmark their support measures," it said.
Governments should focus on reducing compliance burdens and boosting the liquidity of small and medium-size businesses in the short term, the ICC said. Measures could include deferring and waiving payments for corporate and value-added taxes. Chile, Cyprus and Peru have deferred VAT payments for up to three months without penalty, the group noted.
Postponing compliance for new or changing tax regulations can help companies that already are preoccupied with changes wrought by the pandemic, the ICC said. New tax policy initiatives should be delayed until the crisis is over, the group said.
Other temporary measures could provide cash-flow assistance to companies, the ICC said. France and South Africa have set up specialized funds that give direct aid to small businesses, it said. Bosnia and Herzegovina are paying the employee portion of social security and taxes for small businesses, it added.
Yet short-term measures may not be enough, the group cautioned. Corporate debt and depleted cash reserves will strain companies, the ICC said. A broader set of tax policies are needed, the group said, as the world's economy slowly recovers from the spread of the virus, which causes the respiratory disease COVID-19.
Encouraging companies to work directly on COVID-19 mitigation efforts will help shorten the pandemic, the ICC said. Tax deductions for the cost of donated goods would be one step, it said. Grants and tax credits directed at efforts helping to develop a vaccine or virus medications will also help, it said.
Additional steps include extending short-term tax deferrals and waiving tax payments as the pandemic progresses into the midterm, the ICC said. The ICC also expressed support for targeted and temporary tax relief measures proposed by the Organization for Economic Cooperation and Development.
The goal of tax policy should be preserving the cash reserves of companies, the ICC tax commission chair, Christian Kaeser, told Law360 on April 26.
"Liquidity is the key aspect right now," he said. "We must focus on measures ensuring the short term availability of cash."
Policies such as refunding prepaid taxes and deferring taxes due will help accomplish this, he said.
--Editing by Tim Ruel.
Update: This article has been updated with comments from an ICC representative.
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