COVID-19 and taxes: Policies for the post-pandemic recovery

  • The COVID-19 pandemic has placed unprecedented strain on public finances across developing countries. Large fiscal responses and weak economic activity have widened deficits and increased public debt, which for many will be unsustainable over the medium-term.
  • It is important for policymakers to consider policies for mobilising additional revenue. To this end, this policy brief discusses reform options across four types of taxes: wealth, property, consumption, and corporate income.
  • Wealth taxes are underutilised as a policy tool. There is an opportunity to leverage them in response to COVID-19 as they can help reduce inequality and pave the way for equitable recovery. Linked to this option is the expansion of taxes on land and property, targeting the most visible form of wealth in most countries.
  • The brief also outlines policy recommendations on more conventional tools: consumption and corporate taxes, which can be used more effectively to raise revenue by, for example, rationalising tax expenditures and using technology.