Brian Keegan: Further improvements to Covid-19 wage-subsidy arrangements are likely

In recent days the World Health Organisation has been the focus of much attention and not just for its role in coordinating, advising and supporting the efforts of countries dealing with the pandemic.
Brian Keegan: Further improvements to Covid-19 wage-subsidy arrangements are likely
Protesters rally in Austin, Texas to speak out against the state’s handling of the stay-at-home orders. Pic: AP Photo/Eric Gay

In recent days the World Health Organisation has been the focus of much attention and not just for its role in coordinating, advising and supporting the efforts of countries dealing with the pandemic.

At the very least, its position of authority has been undermined by President Donald Trump’s review of the US contribution to WHO funding, but the WHO is not the only organisation attempting to coordinate the response of countries to Coronavirus.

Last week the EU published its roadmap to lifting Coronavirus containment measures.

That in itself is unusual because, unlike its position on customs and trade policy matters, the EU does not have a core role in health matters.

Instead its function is usually limited to one of support and coordination of the efforts of individual EU member countries.

This may be one reason why the EU seemed slow out of the blocks in its initial response to the pandemic.

Just as there is no shortage of attempts to coordinate activity on health matters across borders, efforts are being made to coordinate the economic and fiscal policy responses of different countries.

The OECD has issued 10 recommendations to revenue authorities in its member countries as to how they could help taxpayers.

These included delaying payments and return filing dates to suspending audit and investigation activity for the duration of the crisis.

There is however a difference between international recommendations and what is actually happening on the ground, and the OECD recommendations did not extend as far as using the tax system to channel relief to businesses. It seems that many developed economies are not just implementing tax payment deferrals but using the tax system to set up wage-subsidy schemes in collaboration with businesses as well.

In almost all instances, wage subsidies are being delivered by countries putting their PAYE systems into reverse.

Rather than taking money out of wage packages, the employers’ payroll returns are being used to divert cash back to employees.

To qualify under the Irish system, employers must be able to demonstrate a 25% drop in their income as a consequence of the crisis.

Other countries are taking a harsher approach.

In New Zealand, it is necessary to prove that there is a 30% reduction in income.

In Australia the decline has to be 50% for larger businesses to qualify.

The Irish wage-subsidy scheme also stands out among its peers because of how swiftly it was implemented and how quickly money is flowing back to those businesses which are trying to retain levels of employment and availing of wage subsidies to do so.

While the Irish system is in place for the past several weeks, the first payment of subsidies under a very similar scheme in the UK won’t start until today.

Another common theme in many countries is the emphasis on direct relief towards employees, with perhaps less concern for the situation of the self-employed.

Here, the pandemic unemployment payment is available to self-employed people, although the rates are lower in comparison with the income supports for employees.

Last week we saw significant changes to the Irish wage-subsidy scheme to increase the benefits for lower paid workers, but also to bring some additional workers, who would normally have been more highly paid, into the system.

There are likely to be further improvements to the wage-subsidy arrangements in the coming days for employers and workers alike.

Coordination of medical approaches led by international agencies is vital in dealing with the pandemic.

But as individual governments address the ensuing commercial chaos, it is how well they match their efforts with the needs of their own business communities which will make the difference.

Brian Keegan is director of public policy with Chartered Accountants Ireland

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