Decisive action has been taken to address the health and economic crises in the face of major uncertainty – The outbreak of COVID-19 is resulting in a health crisis and a drop in economic activity that are without precedent in recent history. Containing and mitigating the spread of the virus has rightly been the first priority of public authorities, to reduce the incidence of the disease, limit the pressure on healthcare systems and prepare for a stronger rebound as mitigation measures are relaxed. The containment and mitigation measures have had sudden and profound economic impacts. OECD estimates suggest that the containment measures could lead to an initial decline in output between one fifth and one quarter in many economies, with consumer spending falling initially by about one third – these are rough indications that only capture the direct effects of containment in a context of very large uncertainty (OECD, 2020). Uncertainty about the development of the pandemic and the duration of the efforts needed to contain and mitigate the virus is large. The evolution of the pandemic will also depend on ongoing efforts to expand the capacity to test, track and trace, to improve treatments for those with severe symptoms, and to develop a vaccine. Many countries have already acted forcefully to limit the economic hardship caused by the direct effects of containment measures. The focus of economic policy measures has been on providing liquidity support to businesses to help them stay afloat and providing income support to vulnerable households. Further and coordinated action to preserve economic capacity and protect the most vulnerable is needed. An escalating policy response, with broader and stronger measures, has been required to keep pace with evolving impacts and risks. Multilateral collaboration and coordination are vital to increase the effectiveness of countries’ responses at all stages of the path to recovery and strengthen the global economy’s resilience to future shocks. In this respect, the internationally coordinated G20 – Action Plan to deal with COVID-19 can have large benefits, through spill-overs from joint action for the global economy.Policy adaptation will be key. The focus can shift from support to limit hardship and maintain economic capacity to stimulus for economic recovery as containment and mitigation measures are relaxed. This progression towards recovery will likely not be linear and smooth, however, with containment and mitigation measures removed only gradually or partially. This might increase the risks of uneven recovery. Specific support will be necessary for developing countries, whichare facing the pandemic with weaker healthcare systems, less favourable conditions to sustain containment, larger informal economies and smaller scope for fiscal and monetary policy. These factors restrict their ability to respond to the health and economic challenges. As such, international coordination, including significant financial support and a willingness to look at how to adapt international standards and instruments to ensure benefits for low income and low capacity countries, will be needed to complement the measures they take domestically. Immediate measures have supported business cash-flow, household income and employment – Many governments’ economic policy responses have been rapid and extensive. The fiscal packages so far haveaimed at cushioning the immediate impact of the sudden drop in economic activity on firms and households, and to preserve countries’ productive capacity. While there are large variations in the size of fiscal packages, most are significant, and some countries have taken unprecedented action. Getting the support to where it is most urgently needed, including to small and medium-sized enterprises, nevertheless poses significant administrative challenges.Maintaining business cash-flow has been a core goalof the fiscal policy measures that have been introduced, supported by monetary and financial policies. Measures have included extending deadlines for tax filing, the deferral of tax payments, the provision of faster tax refunds, more generous loss offset provisions, and some tax exemptions, including from social security contributions, payroll taxes or property taxes. Countries have also implemented wide-ranging measures tohelp businesses retain their workersthrough short-time work schemes or wage subsidies. There is evidence, from policies implemented in the wake of the global financial crisis, that keeping people in work through such schemes is an effective way of providing income support and limiting job losses, while avoiding costly search and matching processes as recovery progresses.Income support to households has been extended in many countries, generally through targeted cash benefits rather than through tax cuts, given the need to deliver support quickly. There are also instances where access to sick-leave benefits has been eased and eligibility expanded, with several countries broadening the coverage of unemployment benefits to self-employed workers in particular. Policy during containment and mitigation should protect household income and employment, and keep businesses afloatAs containment and mitigation measures continue, further adaptation to fast changing circumstances will be key. Tax policy should continue to focus on limiting hardship while maintaining the ability for a quick rebound. This phase calls for fine-tuning and potentially expanding the set of policies already implemented. The costs of policy action may be high, but the costs of inaction are likely to be greater.Protecting household income and employment remains essential during containment and mitigation. This phase may extend over time, which would increase the need for policy support as the impacts on households and businesses become longer and more widespread. There may be a case for extendedwage and income support from governments. Particular consideration should also be given to the self-employed and workers in the informal sector. Businesses are increasingly exposed to solvency risks in addition to liquidity risks as the crisis continues. Policies should adapt to the changing nature of risks, and could include extending deferrals, expanded loss carry-backs which help loss-making firms, and accelerated VAT refunds. The design of these measures should avoid increasing non-compliance risks. Tax support should be targeted to those that need help the most. While administratively costly, targeting may help improve outcomes over time by allowing stronger support where the need is most pressing. Support can focus on the hardest hit sectors. Small and medium-sized enterprises could be prioritised as they may be less able to withstand liquidity and solvency risks. Businesses where employment risks are pronounced could be targeted too, to limit adverse impacts on households and aggregate demand. Fiscal stimulus may be required to shore up recovery after containment and mitigationStrong and sustained support will need to continue and evolve with the gradual recovery. Debtpayments may lead to reduced consumption and investment. Supply shocks may also persist and productivity be reduced where containment and mitigation measures are prolonged or only relaxed gradually and partially. Where the recovery is anaemic, there may be a case for maintaining expansionary fiscal policy for a sustained period to stimulate broader household consumption and business investment. The support measures can be reoriented towards this goal, rather than replaced by large public works.Stimulus during the recovery phase needs to be carefully timed and well targeted given potential differences in the timing of exit from containment and mitigation across sectors and countries. Efforts should be made to avoid locking parts of the economy in support mode where support is no longer needed, while continuing to provide sustained liquidity and income support where still required. Stimulus should provide immediate incentives to spend, be credible and well-communicated to avoid further eroding confidence and resulting mostly in increased savings instead of consumption. Stimulus could also connect to longer term policy objectives, including resilience to health risks, decarbonisation and other areas where positive spillovers exist. Policy coordination will make stimulus even more effective. Countries least affected, and those with most room to act, could act strongly and create positive feedback loops through trade and investment links, providing a boost to the global economy, particularly since strengthening the ability of countries to respond to the health crisis will reduce the likelihood of flare-ups of the virus. Exploring options for tax policy in the aftermath of the crisis – Tax revenues are likely to be significantly reduced for a number of years, due to the direct effects of the crisis as well as due to policy action during the crisis. The best way to boost tax revenue will be to support solid growth, including through sufficiently strong and sustained stimulus. Tax policy can contribute to covering the costs of the crisis and policy responses to it. Efforts to restore public finances should not come too early, but when they come tax will have a key role to play. Revenue levels and tax structure may need to be adapted after the pandemic. This can occur in tandem with other policies to smooth the costs of the crisis over time.The unprecedented nature of the crisis is prompting a reflection on whether some new tax measures could be contemplated and more traditional ones reconsidered. This could include reflections on how to support progressivity of the overall tax system. In consultation with member countries of the OECD/G20 Inclusive Framework on BEPS and other organisations, the OECD stands ready to explore and assess new ideas as well as revisit existing ones, e.g. solidarity levies, carbon taxes, etc.In a post-crisis environment, it is likely that addressing the tax challenges of the digitalisation of the economy and ensuring that MNEs pay a minimum level of tax (Pillar 2) will become more prominent. The work of the Inclusive Framework to address the tax challenges of the digitalisation of the economy is ongoing and progressing, keeping track of the changing global economic circumstances. The increased use of digital services and the need to collect more revenues could provide new impetus to efforts to reach agreement on Pillar 1 issues internationally. Governments could focus on incentivising investment while strengthening the taxation of economic rents and boosting resilience. Tax cooperation will be more important to avoid that tax disputes trigger trade wars which would harm recovery. Increasing tax certainty, by improving dispute resolution and prevention mechanisms, is part of this effort. International support could help developing countries respond stronglyThe COVID-19 crisis illustrates our collective vulnerability, and highlights the collective benefits for strengthening all countries’ resilience to pandemics.As such, all countries have a direct interest in eradicating the virus and rebuilding economic life throughout the world. This will require a new scale of support for developing countries, where the human cost of the economic crisis will be felt deeperdue to weaker healthcare systems, more limited capacity – including limited fiscal space – to cushion impacts, and larger exposure to reduced trade, tourism and lower oil prices. This will require significant new external financing, as well as more systematic support to restructure and cancel debts, and rebuild economies and tax systems that can provide universal healthcare will be needed. International support can help countries improve their domestic resource mobilisation and provide the sustainable financing necessary for long-term resilience. Across a range of areas, including expanding the tax base through property, carbon and progressive income taxes, as well as through the digitalisation of the tax administration there is significant potential for developing countries to increase their revenues. In all of these areas international cooperation can make a significant contribution, through a combination of financing and the provision of expertise and information. Low income and low capacity countries may further benefit from new efforts at the international level to address the challenges they face in taxing cross-border activity and offshore assets. Whilst significant progress has been made in recent years in increasing international tax cooperation, many developing countries, especially low income and low capacity countries, feel they have yet to benefit substantially, and perceive the need for further reforms. The Inclusive Framework should take stock of progress and identify new measures that could be taken to specifically address the challenges low income and low capacity countries are facing in international tax.