Emergency tax policy responses to
the Covid-19 pandemic
Limiting damage to productive potential andprotecting the vulnerable

20 March 2020

Detected cases of Covid-19 are quickly rising in many countries, with major adverse effects on healthand mortality. To fight the outbreak and spread of the virus, countries are imposing unprecedented
measures. The result is that economic activity has decreased sharply in many countries and greater
uncertainty has eroded confidence. In the face of this crisis, the immediate priority is to respondquickly to support households and improve liquidity for businesses to keep the productive capacity ofeconomies intact as much as possible. A range of tax policy and tax administration measures could
be considered by governments. These potential measures, which are not recommendations but areintended to assist policymakers as they respond in their own national context, include:

Temporarily provide more generous welfare payments and income
support, including through benefits provided through the tax system, toindividuals and workers, including those that are normally not entitled to suchpayments. This could include broader access to unemployment benefits, sickleave or family leave, also for self-employed workers; and increasing
standard cash benefits delivered through the tax system to offset short-term
impacts on lower income households.

Waiving or deferring employer and self-employed social security
contributions, as well as payroll related taxes. Hard-hit sectors thathave been part of a shutdown or that have suffered significant economic
consequences could benefit from the waiver of payroll related taxes and social
security contributions that are paid by the employer or the self-employed, toimmediately reduce labour costs. The sectors covered could be expanded as
the economic consequences become more widespread.

Providing tax concessions for workers in health and otheremergency-related sectors. In order to reward people for working extra

hours and in potentially dangerous conditions, governments could partiallyexempt labour incomes (e.g. income from overtime) from personal income
taxation and social security contributions. In addition, governments could
incentivise some retired workers to temporarily re-enter the workforce during
the crisis by ensuring that such work does not affect eligibility to their pension
entitlements.

Deferring payments of VAT, customs or excise duties for imported
items (e.g. food, medicine, capital goods), avoiding abuse through careful
administration.

Speeding up refunds of excess input VAT, accompanied by targetedmeasures to limit fraud risks.

Simplifying procedures for claiming relief from VAT on bad debts,

including by reducing the minimum period of payment delay that is required for
VAT on issued invoices in order to be eligible to obtain relief.

Adjusting the required advance payments on the basis of a revised
expected tax liability that more closely approximates the taxpayer’s likely

final tax liability, taking into account the expected impact on business turnover(instead of using last year’s sales or profits as a proxy).

Deferring or waiving taxes that are levied on a tax base that does notvary with the immediate economic cycle, e.g. recurrent businessproperty taxes or business turnover taxes.

Increasing the generosity of loss carry-forward provisions. Oneoption is to turn loss-carry forward provisions into a loss-carry backward
provision, where businesses could opt to receive a one-off cash payment thatequals their accumulated tax losses multiplied by the statutory corporate
income tax rate.

Preparing for recovery including through tax policy. While theimmediate focus is on maintaining liquidity and providing income support,
governments need to prepare for a careful balance of fiscal stimulus and fiscal
consolidation once the pandemic subsides.
If the outbreak is prolonged and the economic impacts deep, as increasingly appears to be the casefor many countries, then policies to keep the economy on standby become more costly and lesseffective. In this context, the focus has already begun to shift to more traditional stimulus policies that
seek to repair confidence and stimulate economic activity.
This paper is published under the responsibility of the Secretary-General of the OECD. The opinions
expressed and the arguments employed herein do not necessarily reflect the official views of OECDmember countries.

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