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Minister of Finance Bill Morneau speaks to reporters in the foyer of the House of Commons on March 12, 2020.Justin Tang/The Canadian Press

Tax and Spend is a new series that examines the intricacies and oddities of taxation and government spending.

Central banks fired the first shot in the campaign to offset the economic blows from the novel coronavirus. But a series of interest rate reductions this month, triggered if not co-ordinated by the U.S. Federal Reserve, gave only temporary comfort to equity markets. Now governments across the globe are starting to roll out fiscal measures, including Canada, which on Wednesday announced $1-billion in funding to fight the virus and signalled there could be more to come later in the month.

The steps being contemplated range from the narrow – South Korea is providing support to outdoor markets – to the very broad, with U.S. President Donald Trump proposing a $1-trillion cut to his country’s payroll taxes. Targeted fiscal measures stand a better chance of reviving consumer demand and business spending than interest rate cuts, says Andreas Schotter, associate professor of international business at the Ivey Business School at the University of Western Ontario.

But Mr. Schotter says he is concerned about the disjointed effort by advanced economies to respond to the coronavirus crisis, citing Mr. Trump’s surprise announcement to block most travel from continental Europe for 30 days. "The leader of the world’s biggest economy doesn’t even understand this.”

Below are some of the fiscal measures being implemented or contemplated around the world.

Australia: Tightly integrated with the Chinese economy, Australia is facing the prospect of a technical recession, says the Bank of Nova Scotia in a research note issued Thursday. In response to that economic danger, Canberra said Thursday it will spend 17.6-billion Australian dollars (C$15.3-billion), equivalent to 0.9 per cent of its GDP, with 11-billion Australian dollars to be injected into the economy before the end of June.

Nearly half of that stimulus, 8-billion Australian dollars, will go to employers to head off layoffs, including payments of between 2,000 and 25,000 Australian dollars to small and medium firms so they can keep or hire staff. Another 3.9-billion Australian dollars will be spent on tax measures aimed at supporting private-sector capital spending by increasing write-off limits for assets and accelerating how quickly depreciation can be claimed. And 1-billion Australian dollars is to be spent on helping out the Australian tourism industry.

Those measures are top of the 2.4-billion Australian dollars the country will spend on directly fighting the coronavirus.

China: Beijing has said it will spend 110.5-billion yuan (C$21.8-billion) to combat the epidemic. The country has also increased funding for areas hard-hit by the virus, and regional governments are looking at more rapid roll-out of infrastructure spending. In addition, China has moved to ease lending requirements for smaller businesses and will loosen environmental regulations to make it easier for companies to resume production.

France: As the country takes increasingly stringent steps to contain the coronavirus, it is starting to look at economic stimulus, including new rules to increase bank lending to companies. And Finance Minister Bruno Le Maire said Thursday he is “extremely vigilant” about Air France-KLM, in the wake of the United States halting flights from mainland Europe. In a speech on Thursday, President Emmanuel Macron said businesses would postpone the payment of business taxes due in March and that his government would pay the salaries of anyone forced to stop work.

Italy: Prime Minister Giuseppe Conte said this week his government will spend up to €25-billion in aid to companies and families, with the Italian cabinet set to approve €12-billion of spending on Friday. The government has not made public any detailed plans, but it has said it may take steps to support companies’ liquidity. And Mr. Conte has said his country may need to ask the European Union for funds.

Japan: Tokyo’s latest aid measures, worth C$5.5-billion, are targeted to small and mid-sized businesses. That package is in addition to plans by the Bank of Japan Governor Haruhiko Kuroda to increase the liquidity of markets.

South Korea: South Korea has taken an aggressive approach to fighting the virus, both in public health measures and in its fiscal response. Seoul rolled out a 11.7-trillion won (C$13.5-billion) stimulus package, including 2.3-trillion won for the health sector’s quarantine efforts and 3-trillion won allocated to small and medium-sized business, along with funds for childcare and outdoor markets. In addition, the government will offer favourable loan terms to exporters hurt by the economic fallout and offer retraining for workers who have lost their jobs.

Britain: On Wednesday, the British government unveiled stimulus measures totalling £12-billion (C$21.2-billion), part of a larger spending package, just after the Bank of England cut interest rates 50 basis points to 0.25 per cent. The fiscal measures announced this week include enhanced sick-pay benefits, tax cuts for small businesses, additional funding for health care, and loans and grants for businesses and local governments.

United States: Mr. Trump is proposing measures focused on a cut in federal payroll taxes, which could give workers and businesses US$1-trillion in returned contributions. In 2011, the Obama administration used payroll-tax reductions to stimulate the economy, cutting employee contributions by two percentage points. Mr. Trump’s proposals are more aggressive, aiming to wipe out payroll taxes for both employees and businesses for at least the rest of the year. Democrats are signalling they oppose the payroll-tax freeze, however, as a broader stimulus package is assembled for Congress to consider.

With reports from Reuters and The Associated Press

Tax and Spend is a new series that examines the intricacies and oddities of taxation and government spending.

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