Commodity Online
MUMBAI: Tax based fiscal stimulus constitute as much as 56% of the net effect of fiscal stimulus and assumes much greater importance than just spending measures as nations try to grapple with ongoing global financial crisis, according to a recent OECD report.

Though the approach has varied from country to country, Ernst & Young’s study illustrates that many countries have focused their tax-based fiscal stimulus efforts on similar types of activities.

"In an increasingly global and interconnected business arena, stimulus-driven tax measures are being adopted in at least one – and likely many – of the jurisdictions in which a multinational corporation operates. Companies have to be aware of these developments and understand their implications to prepare properly for their impact," says Mark Weinberger, Global Tax Leader at Ernst & Young.


In its recent study - Worldwide fiscal stimulus – tax policy plays a major role, , Ernst & Young examines these tax-related fiscal stimulus measures in 24 key jurisdictions (Countries covered by this study are: Argentina, Australia, Belgium, Brazil, Canada, China, The Czech Republic, European Union, France, Germany, Hong Kong, Hungary, India, Ireland, Italy, Japan, Netherlands, Russia, Singapore, South Korea, Switzerland, Taiwan, Turkey, United Kingdom and United States), including India, and identifies themes that are emerging as governments increasingly rely on their tax systems to administer fiscal stimulus.

Types of tax based fiscal stimulus efforts:
Accelerated depreciation programs – to improve cash flow for businesses by allowing them to write off the costs of investments more rapidly (adopted by countries such as India, Australia, Canada, The Czech Republic, France, Germany, Ireland, Netherlands, Russia, Singapore and United States). – to improve cash flow for businesses by allowing them to write off the costs of investments more rapidly (adopted by countries such as India, Australia, Canada, The Czech Republic, France, Germany, Ireland, Netherlands, Russia, Singapore and United States).

Carryforward and carryback provisions – to provide cash flow assistance by giving traditionally profitable companies more latitude in using net operating loss credits they are accumulating in the current difficult environment (adopted by countries such as Australia (proposed), France, Japan, Singapore, S Korea, Taiwan, United Kingdom and United States). – to provide cash flow assistance by giving traditionally profitable companies more latitude in using net operating loss credits they are accumulating in the current difficult environment (adopted by countries such as Australia (proposed), France, Japan, Singapore, S Korea, Taiwan, United Kingdom and United States).

Reductions in corporate income tax rates – to improve cash flow, stimulate overall demand and encourage investment, as well as to be more attractive in the international competition for jobs and investment (adopted by countries such as Canada, The Czech Republic, Italy, Japan, Netherlands, Russia, Singapore, S Korea and Taiwan). – to improve cash flow, stimulate overall demand and encourage investment, as well as to be more attractive in the international competition for jobs and investment (adopted by countries such as Canada, The Czech Republic, Italy, Japan, Netherlands, Russia, Singapore, S Korea and Taiwan).

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