The OECD prepared a separate report entitled Tax and Fiscal Policy After the COVID-19 Crisis for the meeting of G20 Finance Ministers on 13 October 2021. This report was included as an attachment to the main report to the Finance Ministers.

The report notes that when the economic recovery is well under way, the post-crisis environment will provide an opportunity for countries to carry out a reassessment of their tax and spending policies. Countries will need to implement a mix of tax and expenditure policies as part of well-designed policy packages. The report considers how tax policies can support inclusive economic growth beyond the pandemic.

Encouragement of innovation and productivity is an important goal. The tax system can stimulate investment in research and development, and related activities, through well-designed measures, targeting in particular new, small and low-productivity firms. The tax challenges of digitalisation, and continuing tax avoidance and evasion, require international tax co-operation. One example of this cooperation is the implementation of the two-pillar solution in relation to the tax challenges of the digitalisation of the economy.

Other tax raising measures could include increasing the taxes on capital income of individuals, as this appears to have a minimal impact on economic growth. Countries must also continue to implement improved standards on the collection of value added tax (VAT) and on the online sales of goods, services and digital products.

Tax policy can also promote greater equality through policies to address the distribution of income and wealth. Taxes on personal capital income and property are likely to become more important in the future, with more focus on the taxation of the highest levels of income and wealth. Digitalisation will create more difficulties for personal tax systems as it will lead to greater taxpayer mobility, new forms of work and new types of assets.

Tax systems should be consistent with environmentally sustainable outcomes, in relation to environmental taxes or other tax provisions. Most greenhouse gas emissions are currently priced too low or are not priced at all, and more cross-border co-operation is required on climate policies generally. Cooperation could allow the reduction of emissions at a lower cost and could improve the development of low-emission technologies.

Domestic resource mobilisation is increasingly important for developing countries where tax revenues as a share of GDP were at a low level before the pandemic. The tax system can be a way of financing development and achieving the Sustainable Development Goals. Developing countries could improve their presumptive and simplified tax regimes to bring individuals and businesses within the formal economy; and broaden the tax base by scrapping ineffective tax incentives for investment and other wasteful tax expenditures. Health taxes could be used to increase the level of funding in healthcare.

There is a greater need to educate taxpayers, as the attitude of the general public towards taxes will impact the design of tax systems. Communication of credible information on the tax system can inform public debate and improve the decision making of taxpayers in relation to their tax compliance.