UHY GLOBAL AUGUST 2020 GLOBAL NEWS GLOBAL NEWS


IMF FORECASTS SHARP DOWNTURN The International Monetary Fund (IMF) has predicted that the global economy will contract sharply in 2020, on a scale significantly worse than the 2008 financial crisis and to an extent unseen since the Great Depression of the 1930s. Describing the impact of the Covid-19 pandemic as ‘a crisis like no other’, the IMF issued an update to the World Economic Outlook published in April, revising its projection for the decline in global economic performance downward from 3% to 4.9%. The cumulative loss for the period 2020-2021 is estimated at USD 12 trillion, and over 95% of countries are projected to have negative per capita growth in 2020. Recovery is also forecast to be slower than originally forecast, with predictions estimating that it will take two years for the global economy to return to levels seen at the end of 2019. Growth in 2021 is projected at 5.4% globally. While the latest forecast continues to be subject to uncertainty, Gita Gopinath, economic counsellor and director of the IMF’s Research Department, highlighted the positive impact of exceptional fiscal support and monetary policies implemented in response to the pandemic: “In many countries, these measures have succeeded in supporting livelihoods and prevented large-scale bankruptcies, thus helping to reduce lasting scars and aiding a recovery.” She also reiterated the importance of multilateral cooperation in laying the foundations for a healthy global recovery in 2021 and beyond. The organisation is actively deploying a USD 1 trillion lending capacity to support vulnerable countries during the Covid-19 crisis. For more information, see the World Economic Outlook Update, June 2020. OLYMPIC HOPES REMAIN John Coates, chair of the International Olympic Committee’s (IOC) coordination commission has said that the postponed Tokyo Olympics and Paralympics should stand as “a beacon of hope” with the Olympic flame as “the light at the end of the tunnel”, despite ongoing uncertainty as to whether the Games will take place in 2021. The 2020 Olympics have been rescheduled for 23 July to 8 August 2021 and the Paralympics for 24 August to 5 September 2021, in the hope that this will allow sufficient time for health authorities and the organisers to address the changing landscape and disruption caused by the coronavirus pandemic. But health experts have warned that the Games may still be in doubt due to uncertainties around the ability of the host nation and countries around the world to control Covid-19. Planning for the rescheduled Games is being led by two new task forces – the Tokyo Organizing Committee’s (TOC) ‘New Launch’ and the IOC’s ‘Here We Go’. Toshiro Muto, CEO of the TOC, said that although there is no guarantee that the Games will go ahead in 2021, they will continue to work hard to make preparations, adding, “We sincerely hope that come next year mankind will manage to overcome the coronavirus crisis.” The costs associated with rescheduling the Games are likely to be significant, with estimates ranging from USD 2–6 billion. The estimated real cost to Japan was already twice the official budget of USD 12.6 billion prior to the postponement, primarily due to the construction of secondary infrastructure. Although these costs have largely been borne by the Japanese government, domestic companies – including Nomura, Toyota, Canon and Panasonic – have supported the Tokyo Olympics to an extent unmatched in previous Games, committing over USD 3 billion in sponsorship revenue. The TOC is hopeful that this support will continue. The rescheduling of what had been referred to as the ‘Recovery Olympics’, representing a huge rebuilding effort after the 2011 Fukushima earthquake and tsunami, marks the first time in history that the Games have been postponed. DAC6 DEADLINES DEFERRED The European Commission has announced that various deadlines for reporting under the DAC6 directive on cross-border arrangements will be deferred for three months. DAC6 – European Union (EU) Council Directive 2018/882/EU – aims to bring transparency and fairness in taxation, and requires mandatory disclosure on cross-border arrangements within the EU, or where an entity in the EU has an arrangement with a non-EU country. The UK is still considered as part of the EU under DAC6 despite Brexit. Reporting applies to arrangements that meet certain ‘hallmarks’, with examples including fees linked to a tax advantage, loss buying, converting income to capital, claiming double tax relief or depreciation in more than one country, and transfer pricing arrangements. The first DAC6 report, covering ‘historical’ transactions for the period 25 June 2018 to 30 June 2020, was due to be filed by 31 August 2020. A 30-day reporting requirement came into effect on 1 July 2020. However, the Commission has announced a postponement “to take account of the difficulties that businesses and Member States are facing at the moment with the coronavirus crisis.” The deadline for historical reporting has been deferred to 30 November 2020. The beginning of the 30-day period for reporting cross-border arrangements has been deferred to 1 October 2020, meaning the earliest 30-day reporting deadline will be 31 October 2020. Reporting arrangements for the period 1 July 2020 to 30 September 2020 are expected to be reported by the end of the deferral period. A further three-month deferral (six months in total) on reporting deadlines is possible, depending on the evolution of the coronavirus pandemic. The first exchange of information between Member States on cross-border arrangements has also been deferred from 31 October 2020 to 31 January 2021. Further information is available via the European Commission’s webpage on administrative cooperation in (direct) taxation in the EU. OECD COVID-19 TAX GUIDANCE In recent months, the Organisation for Economic Cooperation and Development (OECD) has prioritised work on targeted and temporary tax policy and tax administration measures related to the coronavirus pandemic. In addition to the ongoing publication of key fiscal and monetary policy responses, this includes a toolkit and summary document outlining measures taken by governments around the world to support taxpayers in response to Covid-19. As work patterns have changed, and some cross-border workers and individuals have found themselves stranded in jurisdictions that are not their country of residence, the OECD has advised that coronavirus-related tax concerns should be treated as exceptional. Countries around the world have responded to the pandemic with various tax policies, including: Extending payment and filing deadlines Allowing taxpayers to defer payment Remitting penalties and interest Suspending debt recovery Expediting refunds Relaxing audit policies Enhancing services, including e-filing options Releasing guidance for taxpayers. The OECD has also highlighted the importance of countries working together to mitigate potentially significant compliance and administrative costs, and to alleviate the unplanned tax implications and any other new burdens arising as a result of the Covid-19 crisis. Further information on the OECD’s Covid-19 tax guidance can be found at www.oecd.org/tax/tax-policy SOMALIA SET TO REJOIN GLOBAL ECONOMY Following a range of broad economic reforms, the International Monetary Fund (IMF) and theWorld Bank have announced that Somalia is eligible for debt relief through the Heavily Indebted Poor Countries (HIPC) initiative – enabling the country’s reintegration into the global economy after 30 years. Under the HIPC initiative, Somalia’s debt will be reduced irrevocably from over USD 5 billion to USD 557 million in three years’ time if the country sustains its commitment to reform. Bridge financing has been provided by Norway, Italy, the UK and the European Union (EU). Debt relief will normalise Somalia’s relations with the international community, providing greater access to financial resources that will help strengthen the economy, accelerate growth, improve social conditions and raise millions out of poverty. Kristalina Georgieva, Managing Director of the IMF praised the Somali government’s successful reform efforts, which have laid the foundation for inclusive economic growth. “I am confident a more resilient and prosperous future lies ahead for the people of Somalia,” she said. Somalia is also planning to hold its first democratic elections since 1969. Supported by the United Nations Assistance Mission in Somalia (UNSOM), parliamentary elections are planned for December 2020, and presidential elections for February 2021.


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