The Covid-19 virus currently has its way in a gruesome manner. At the moment of writing this article, we experience a fully-fledged war. We have immense respect for those that are fighting on the frontline. Many of our clients ask us what’s next– if this monster’s rage is over – what about their taxes? It is not easy to make an estimation, but we do recognize some early tendencies.
The Coronavirus has brought us directly into a war situation. We believe that those countries that got hit most severely, like Italy, Spain, France… and possibly the UK… will apply a so-called War Tax. Governments will appeal to the wave of solidarity we currently see. Or perhaps, Europe will witness some form of solidarity tax. A quick blow! While it is hard to make estimations as to what kind of taxes is heading our way. Almost certainly, the governments will decide ‘the strongest shoulders bear the heaviest burden’.
Another (additional) choice could include the raise of VAT percentages. It’s just a matter of changing a number. For example, raising VAT from 20% to 25%. There is a real risk that a temporary measure could last a very long time. And it is a very easy measure that immediately brings in money.
Tax on wealth
Another form of tax that works very well – more politically inspired than bringing in money – concerns taxes on wealth. Some countries are already taxing the wealthof people, and they quickly could raise existing wealth taxes. Other countries will use this situation to implement new laws on taxing wealth.
The Coronavirus will also break some taboos. Certain countries currently have low taxes on, for example, real estate tax. The current situation may urge them to raise taxes on real estate. Or countries where capital gains fall under friendly tax regimes, etcetera…
Tendencies per country…
At the moment, Western European countries with high tax burdens have been hit harder than thinly populated countries in Central and Eastern Europe. Countries like Bulgaria and Romania will maintain their attractive tax rates. Moreover, countries with so-called territorial tax regimes, like Hong Kong and Singapore, barely are hit. It seems now more than ever that we need to “Go East”.
Besides, businesses will start to think less globally. So Eastern-Europe may become a winner if they play their cards right.