OECD – TAX AND DEVELOPMENT: PROGRESS REPORT IN THE COVID-19 ERA. The COVID-19 pandemic has had a huge impact on the health of both people and economies, with developing countries hit the hardest. In the past year, governments have been caught between the need to provide income support and liquidity to individuals and businesses and at the same time trying to collect as much revenue as possible to finance spending programmes. Tax administrations are playing a crucial role in delivering pandemic responses and trying to maintain revenue collections. For developing countries that have limited fiscal space to begin with, including many that are already heavily indebted, this has been extremely challenging. In these circumstances, helping governments in developing countries to gather as much international experience on tax policy and administration responses to the pandemic has been one immediate priority for the OECD. Tackling the ‘low hanging fruit’ in terms of revenue collection has also been important. For example, as the pandemic accelerated the shift to e-commerce, the work to support developing countries implement effective e-commerce Value Added Tax (VAT) has also grown. In a period of tight fiscal space, and as tolerance for tax avoidance lowers further, ongoing support for the implementation of the Base Erosion and Profit Shifting (BEPS) measures has been equally important. Demand has also remained high for assistance in exchange of information (EOI) to support the fight against tax evasion, and so the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) launched a new capacity building strategy in 2020 to improve the impact of its assistance to developing countries. The current tensions in international tax are magnified in today’s environment as pressures grow to meet urgent domestic resource mobilisation needs in the poorest countries. At the plenary meeting of the OECD/G20 Inclusive Framework on BEPS (the Inclusive Framework) in January 2021, Finance Ministers from Canada, Germany, Indonesia, Italy, Jamaica and the United Kingdom all stressed that a multilateral approach to taxing the digital economy will be key to reducing these tensions. Indeed, this is crucial to avoiding uncoordinated unilateral measures causing double taxation and retaliatory trade tariffs, the cost of which could be significant. Developing countries have continued to engage in the negotiations in the Inclusive Framework highlighting the need for simplicity in the design and implementation of both pillars of the proposal. Following the suspension of travel in March 2020, the OECD made a rapid adjustment to providing virtual technical assistance, allowing us to continue to provide support. The expansion of e-learning was also accelerated, ensuring that there was continued access to training. Virtual workshops were organised to replace face-to-face events. The virtual format enabled significantly greater access, including an increase in female participation. In 2020, the OECD’s tax capacity building service managed to cover more than 30 000 tax officials from the developing world, compared to 5 000 in a typical year. While virtual activities cannot replicate all the benefits of physical events, feedback has been positive, and a hybrid approach is likely to be taken in the future when international travel resumes. With domestic resource mobilisation (DRM) becoming an increasingly critical element to financing the Sustainable Development Goals (SDGs) and the extraordinary strain that the pandemic has put on developing countries’ ability to collect tax, now is the time to examine closely how well the international tax system serves the needs of developing countries and how the OECD can better support DRM. Developing countries have benefited in many ways from participating in the international tax discussions in recent years, particularly the Inclusive Framework on BEPS. However, maintaining the strong delivery focus has necessitated a rapid pace, posing challenges for developing countries with limited capacities. Many are on a steep learning curve, having to adapt to new ways of intergovernmental cooperation. There is also the perception that the agenda is not yet sufficiently balanced to reflect developing countries’ interests. Five years after the creation of the Inclusive Framework, the OECD will work with the G20 to consolidate progress by checking that the Inclusive Framework’s strong coalition of countries continues to advance together and converge on the successful implementation of the global tax rules, paying particular attention to the needs of lower income/lower capacity countries in the Inclusive Framework. A report reflecting potential improvements to enable developing countries to integrate faster, and deeper, into the new international tax architecture will be available later in 2021. The OECD will remain flexible in a very dynamic environment. As the world moves from crisis to recovery and the hope to build back better, tax policymakers will be faced with hard choices, and new approaches to tax policy may be needed to recalibrate their tax bases. This report shows the wide range of work that the OECD does to support developing countries in these challenging times and how our work has had a concrete impact around the globe. This has only been possible with support from an impressive range of development partners and, most importantly, the enthusiastic engagement of the tax policymakers and tax administrators from all the jurisdictions that we serve.