Tax receipts from around the world have fallen by nearly $500bn in real terms to $11.7tn during the Covid-19 pandemic, down from $12.1tn the year before*, which may force Governments to make unprecedented tax increases to make up for losses, reveals a new study of tax revenues worldwide by UHY, the international accountancy network.

UHY’s study shows 26 out of 30 countries suffered from a hit to tax revenues. Some of the biggest decreases include the UK which saw tax revenues fall 11%* to $728bn and Russia which also fell 11%* to $295bn (see table below).

UHY says the fall in tax revenues is due to the Covid-19 pandemic, as governments cut taxes for individuals and businesses in an effort to boost their economies. In addition, tax revenues were hit by a fall in tax on corporate profits and a reduction in transactions that are subject to tax (e.g. VAT on purchases and tax on property transactions).

At the same time, governments introduced Covid support schemes such as covering employees’ wages to help those who were impacted by the pandemic. Although these schemes have helped to boost national economies, the additional costs have impacted public purses significantly. As a result, tax increases will be required in many countries to make up for major deficits.

Some countries have already begun implementing tax increases, such as the UK, which recently increased National Insurance contributions, generating an extra £17bn per year. The Spanish government introduced tax increases in the midst of the pandemic, with the income tax rate on income above EUR 300,000 increasing from 45% to 47%. Spain’s VAT rate on alcohol also increased from 10% to 21% earlier this year.

The US is currently undergoing discussions about imposing increases to corporation tax and rates of income and capital gains tax for the wealthiest households to raise revenues.

Subarna Banerjee, Chairman of UHY International, comments: “The enormous impact of the pandemic on tax revenues has been felt worldwide.”

“Many governments have been put in difficult positions, having to provide support to those who have been hit hard by Covid-19 while trying to prevent revenues from falling too far. Unfortunately, there will come a time where they need to balance the books and some governments may look to use tax increases to do so.”

“However, governments need to be cautious about any dramatic plans to increase their tax revenues. Sudden, large tax increases will place huge amounts of pressure on taxpayers, many of whom are also still getting back on their feet.”

Tax revenues of major economies take a hit during Covid

Germany’s tax revenues fell 8%* to $837bn in 2020. During the pandemic the German government introduced a number of tax reliefs in the hope of boosting the economy. The standard rate of VAT in Germany was reduced from 19% to 16% last year. Businesses in the catering sector, arguably one of the sectors that suffered the most from Covid-19, benefited from an even bigger reduction in VAT from 19% to 7% on food sales.

Another major economy that suffered from a fall in tax revenues was China, falling 5%* to $2.2tn last year. China recognised the impact of the pandemic on smaller enterprises and as a result, introduced a number of tax reliefs focused on supporting these businesses. An example is the significant reduction in Corporate Income Tax, which for small and micro enterprises with a tax income below RMB 1 million, was reduced from 25% to 5% last year. In 2021, it was announced this rate would be cut even further to 2.5%.

Global tax receipts fall 4% during pandemic – costing nearly $500bn in real terms to public finances

Notes for Editors

UHY global press contact:

Leigh Lyons on +44 20 7767 2624

Email: l.lyons@uhy.com – www.uhy.com

Nick Mattison or Richard Crossan

Mattison Public Relations

+44 20 7645 3631

+44 74 4637 5555

Email: richard.crossan@mattison.co.uk

Germany has seen the world’s fastest growth in electric car sales of all major economies * during the pandemic, with sales more than trebling to 194,000 cars in 2020, up from just 63,000 in 2019, shows a study of electric car sales worldwide by UHY, the international accountancy network.

The 207% growth in electric car sales in Germany last year puts it first out of 26 countries** in UHY’s study. This was marginally ahead of Italy, which saw a rise of 204%, from 11,000 units sold in 2019 to 32,000 in 2020. The UK was in third place, with a sales increase of 186% in 2020. Average sales growth of EVs globally in 2020 was 31%.

Worldwide growth in sales of electric cars has outpaced global car sales (including petrol and diesel) which fell by approximately 15% to 64 million in 2020, down from 75 million in 2019***.

Less than a fifth (19%) of countries in UHY’s study saw sales of electric cars fall during the first year of lockdown.

UHY says that Germany has begun a programme of heavy investment in electric vehicle charging infrastructure in order to achieve its target of having 10 million electric vehicles and one million charging stations on German roads by 2030. The country also has generous tax breaks and incentives for purchases of electric cars and charging points. New electric cars priced at less than 40,000EUR benefit from a Government rebate of 9,000EUR, while the state-owned development bank offers a 900EUR grant for the installation of a private electric car charging point.

UHY Wahlen & Partner, says that the launch of several new and updated mass-market electric vehicles in the last year, including the Volkswagen ID.3 and e-Up! has triggered a new wave of sales in Germany. Battery electric cars made up 10% of all new cars sold in Germany in 2020, with fossil fuel-powered cars falling to a 78% share of new car sales.

Dennis Petri, Chair of UHY, comments: “The electric car revolution has picked up a lot of speed worldwide in the past year, despite the effects of the pandemic. Germany is a country with a long history of automotive innovation and it looks like it will again be part of the vanguard in making electric cars a part of everyday life.”

“Many governments around the world have helped to drive the electric vehicle transition through providing subsidies for consumers who purchase EVs. Along with investing in the public charging infrastructure necessary to support electric cars, this is the biggest step governments can take to accelerate a large-scale switch to EVs.”

Thomas Wahlen, Managing Partner at UHY Wahlen & Partner, comments: “Manufacturers and the Government in Germany have both invested a great deal in accelerating the German transition to electric vehicles and they will be hoping this growth rate continues for several more years.”

Electric car sales growth continues to slow in China

UHY’s study shows that electric car sales growth in China continued to slow in the past year, with 968,000 battery electric cars sold in 2020, a 16% increase on 836,000 sold in 2019. The growth rates in the previous two years had been 23% and 54%. China’s sales growth in 2020 placed it 20^th in the table in UHY’s study.

However, China remains by some distance the largest national market in the world for electric cars, with more sales than the next four largest markets combined. Sales of electric cars in China are heavily incentivised by programmes including Beijing’s ‘licence lottery’, which limits the city’s 22 million residents to only 40,000 new petrol cars per year to lower congestion and pollution.

US and Japan both saw electric car sales fall in 2020

UHY’s study also shows that both the US (22^ndplace, electric car sales down 5% in 2020) and Japan (26^th place, electric car sales down 31% in 2020) both saw electric car sales fall in the past year. Less than 2% of new cars sold in the US in 2020 were battery electric vehicles.

Dennis Petri adds: “Electric cars in the US are still generally confined to the east and west coasts – that’s thanks to the incentives offered by state governments in places like California, New York and New Jersey. Car buyers in the rest of the country would benefit from more states following suit.”

Morito Saito, Director at UHY FAS Ltd, UHY’s member firm in Japan, comments: “Japanese car manufacturers still have a relatively limited offering when it comes to battery electric cars even though they were very early adopters of hybrid technology. While some manufacturers in Europe are already implementing plans to produce only electric vehicles, that has not yet happened in Japan.”

* Battery electric passenger cars only, excludes hybrids

** Excluding those registering less than 1,000 electric car sales in 2020

*** Statista – number of cars sold worldwide

Notes for Editors

UHY global press contact: Leigh Lyons on +44 20 7767 2624

Email: l.lyons@uhy.com – www.uhy.com

Nick Mattison or Richard Crossan

Mattison Public Relations

+44 20 7645 3631

+44 74 4637 5555

Email: richard.crossan@mattison.co.uk