Ever since the COVID-19 pandemic struck, things have changed quite a bit for people all over the world, and expats are no exception. As borders were shut down to avoid the spread of the virus, international movement was placed on hold indefinitely. If allowed, you have to undergo more rigorous processes such as testing, vaccination and quarantine.
While the majority of the world is still under strict quarantine, several expats agonizingly wait for a clear sign when they can go back home. However, this also means that there will be a long list of tax bills waiting to get settled when the time comes. And unlike previously implemented systems, the global pandemic has also affected how taxes work.
7 Ways the Pandemic is Changing Tax Systems Around the World
Apart from the long-term isolation that many people face today, financial difficulties have also become more common as expats watch their tax affairs be thrown into chaos. With several changes happening all at once, grasping the idea of everything can become overwhelming. Here are a few key changes happening with tax systems worldwide that you should be aware of.
1. Knowing your tax residency status
This is one of the first few things you must know as you plan to return to your home country and deal with your taxes. In the U.S., tax-related residency status can be “resident for tax purposes” and “non-resident for tax purposes.” In between, you can even be classified as dual-resident while you are in the process of gaining residency.
These three types have different tax obligations, which is why knowing your tax residency is crucial. With this in mind, you can file the correct tax forms and avoid complications with the IRS in the future.
2. The clamor for tax relief
As many countries continue to experience an economic decline due to the COVID-19 pandemic, government officials have lessened the load on taxpayers by implementing tax relief.
In the U.S., they have passed the American Rescue Plan Act of 2021, also known as the COVID-19 stimulus package. This is an effort to help citizens and residents, especially low-income families greatly affected by the pandemic.
3. Leeway for tax burdens
With some countries continuously going in and out of lockdowns, some leeway to previous tax laws has been implemented by governments to help taxpayers receive a form of relief. These can range from financial aid for qualified taxpayers to free or subsidized food and necessities.
The idea behind this implementation is to help groups that have difficulty maintaining a stable income during the pandemic. This can also apply to businesses that need to comply with certain laws meant to protect employees.
4. Depleted tax base
Several countries are experiencing lower tax revenue, which has pushed government agencies to make severe budget cuts. Because of this, the IRS and other U.S. agencies have been having difficulty responding to inquiries from taxpayers and expats abroad.
5. Restructured tax systems
Government bodies have taken into account the economic toll that the pandemic has been brought on their respective countries and are quickly adjusting tax laws to overcome financial challenges. In most cases, these new tax systems will be built with stronger integrity to cater to other emergencies in the future.
6. Plan for recovery in raising taxes
In the United States, government officials are looking into raising taxes to offset an economic recovery plan. While some may consider this an inevitability, it is crucial that authorities do so in a way that will not undermine the fragile economy.
7. Looking to tax the wealthy
As a means of growing the economy again, officials in multiple countries are looking into getting higher-income groups to pay more taxes. By doing so, investment opportunities would increase while boosting economic productivity.
With this in mind, tax revenue can increase significantly, which will allow bigger budget allocations for government projects that can benefit the country as a whole.
Tax Solutions During the Pandemic
As the world remains under a state of pandemic, expats will need to understand the new tax systems and the changes that have been implemented in their home country and the country they are staying in. By doing so, you may avoid any unwanted surprises and are prepared to handle the tax forms addressed to you.
However, for some people, all of these terms and processes can still be confusing at times, which can be stressful. In moments like these, it is best to seek a reliable tax resolution partner who can help you avoid complicated situations. For top-class services for all your pandemic tax needs, reach out to a representative from Tax Samaritan today.