Tax Policy and the COVID-19 Crisis


This article provides some preliminary thoughts on tax policy and the COVID-19 crisis. In the first part, it discusses fiscal measures available to policymakers in response to the COVID-19 crisis. The role of taxation will evolve over the different phases of the pandemic: measures have already been adopted to respond to the crisis in the short-term, but questions remain as to the types of measures that should be adopted in the medium and longer-term. In the second part, this article discusses the current and possible future effects of the pandemic on international tax policy.

Research Highlight 2020

Tax policy and the COVID-19 crisis

Many countries around the world responded to the COVID-19 crisis through unprecedented lockdowns, severely restricting economic activity as well as the personal movement of their citizens. This has had a devastating effect on economies. Tax policy has an important role to play in alleviating and addressing the negative consequences of the lockdown on the economy. This article provided some preliminary thoughts on the fiscal measures available to policymakers in response to the COVID-19 crisis. 

The role of fiscal measures will evolve with the different phases of the crisis caused by the pandemic, and the first part of this article sets out and discusses a number of tax policy options for each of these phases. In the first phase, while the lockdown is in place and countries are experiencing an acute overall disruption, tax measures can help mitigate the impact of the crisis by providing businesses and households with cash flow in order to avoid a complete collapse of the economy. In the second phase, once the lockdown is lifted, businesses and households are likely to require similar economic support measures. Again, tax policy can assist in keeping businesses afloat. However, in this phase, once there is sufficient certainty about the recovery, fiscal policymakers might also consider introducing incentives to stimulate demand and re-establish supply chains. In the third phase, the longer term, tax policy will turn back to its traditional primary objective, namely the generation of revenue. Indeed, once the crisis is over, it is likely that tax will play a key role in offsetting the costs of the crisis.

In the second part of this article the focus narrows to international business taxation, as the crisis comes at a critical juncture in the history of the international tax system. The 137 member countries of the OECD/G20’s Inclusive Framework are currently discussing fundamental and unprecedented reform of the system, and the time for taking final decisions on new and momentous policy directions is fast approaching. Pressure to reach multilateral agreement is high, not least because of wide-spread public and political demand for reform and the growing threat of unilateral action by countries. Against that background, this article asks whether the crisis has provided any further lessons about the existing tax system and reflects on how it may impact the international policy debate at this delicate time. 


Richard Collier, Alice Pirlot and John Vella (2020). Tax Policy and the COVID-19 Crisis, Intertax, 48, 8/9