Building on the first, a second virtual roundtable was held on 4 May with 21 participants from a broad range of backgrounds1. The challenge: to consider potential tax policy measures which could be introduced by governments globally to support economies once they start to emerge from COVID-19.

The roundtable is part of an initial series of three which discusses short- and medium- term measures2, and the longer-term impact and implications. The meeting was held under the Chatham House Rule. The summary below seeks to draw out the key themes – and tensions – which emerged, but does not necessarily reflect a unanimous agreement nor the opinion of any KPMG Member Firm.

Setting the scene

“Don’t rush to fiscal consolidation or austerity3

Chris Morgan, Head of Global Tax Policy, KPMG International, introduced the roundtable referring to the four-stage analysis of COVID-19 –Reaction, Resilience, Recovery and New Reality4. He noted that many governments would have built-up large deficits to pay for emergency measures during COVID-19 and at some stage, once economies emerge from the downturn, it is likely that there will be eventual tax increases to reduce the debts. However, it will be necessary to stimulate a recovery first. It is therefore an open question how soon countries will, or should, move to fiscal consolidation. Where countries are able to borrow at low interest rates, they may refrain from significantly increasing tax for a period and continue with fiscal stimulus measures. However, countries that are unable to borrow at low rates would not have the same flexibility. It was also noted that the view expressed by Pascal Saint-Amans, both during a WebEx organised by Jericho Chambers on 24 Apriland during the OECD COVID-19 presentation on 4 May was that, where possible, government should not rush fiscal consolidation.***

Economic Background

“We’re looking at the biggest economic recession in history…this will leave a big scar”

Some introductory comments were made on the economic effects of the crisis. While these focused in particular on the UK economy, they may be relevant elsewhere. The UK is probably facing the biggest economic downturn in history and the question is whether there will be an immediate recovery or, more likely, whether we will be left with a smaller economy than we otherwise would have had for quite some time―for example, due to the impact of unemployment, business failures, interruption of international supply chains and uncertainty. There was a sense that there will be significant pressure to continue relief measures, such as job retention schemes, and to provide support for specific industries that have been worst hit. At some point, however, all agreed it will be necessary to wind these down.

It was expected that there would be an increased deficit for a number of years post crisis before any move to increase tax significantly.

Don’t rush to austerity; maintain government support and reduce it gradually; only consider any potential tax increase once recovery is underway

“What will happen to Tax Policy? A difficult balancing act to get growth and collect tax. Tax policy creation will be much more nuanced than ever before”

There was a general view amongst participants that there should not be a return to austerity―as actioned in the UK and many other countries following the 2008 financial crisis. Rather, there was a sense that it would be necessary to keep business support in place in the near future and reduce it progressively, and that there should be a period without significant tax rises in order to facilitate an economic recovery. Only once the recovery was established should there be any significant increase in tax.

It was noted that social and economic collaboration is critical during and coming out of the COVID-19 situation, and that there is rising inequality which is made worse by deprivation caused by the pandemic. Some of those worst affected are those on low incomes, essential workers exposed to health risks, and those with least access to healthcare.

However, there were differing views on how extra tax could be raised. In many jurisdictions, especially the Global North, there is already a broad income tax base and VAT and sales taxes are widely used. Some participants argued strongly against increasing taxes on businesses that are already struggling. Some were in favour of looking at wealth tax and green taxes. There was also a suggestion that we may see the introduction of more hypothecated taxes―for example, to pay for healthcare ―or more progressive sales taxes.

Provide targeted incentives rather than general cuts in corporation tax

“Now is the time to inject liquidity into life. Tax them later”

The question was raised whether or not corporation taxes should be reduced in order to stimulate investment. None of the participants favoured that approach, noting that it could lead to windfall gains for the investors and have unintended spill over consequences, especially in the Global South. Politically, there would be pressure not to reduce corporation tax where companies have received government bailouts in one form or another. Some of the attendees did express a concern that there would be pressure on developing countries to reduce tax rates.

However, it was noted that there were huge challenges with returning to normal business activity. For example, ensuring social distancing and safety in the workplace, facilitating increased working from home, and improving public transport. Consideration could be given to using tax incentives to encourage investment in enabling technologies.

Some low-income countries are incentivising small local businesses as cross-border supply chains are disrupted

“Supporting developing nations with liquidity is helpful now, but will cause problems in the future so we need to work on helping them to strengthen their national taxes”

Participants noted that many countries in the Global South are seeing a significant reduction in the tax take and even those that are not directly impacted by the pandemic are suffering economic difficulties due to closed borders. In the short- and medium-term, food security is a priority for many of the poorest countries and so governments are responding by incentivising small local businesses. But this in turn will lead to a lower tax take over the next few years.***

While multilateralism was generally supported, countries - especially those in the Global South – may need room to act unilaterally

“Optimising in tight constraints will be even more important than ever before”

General support was expressed for multilateral solutions to global tax issues. But it was also noted that this takes time and that many developing countries would need to act quickly.

Furthermore, participants noted that different countries face differing problems depending upon their situations. For example, oil exporting countries are facing different issues to low-income countries. There will be need for creative solutions and the ability for some unilateral action.

Wealth and property taxes are being discussed globally

“Tax is a multi-stakeholder issue and there is a psychological aspect to this - Tax Morale - peoples willingness to pay more taxes towards things they view as worthwhile”

There was a debate about the potential for jurisdictions to use wealth taxes to increase revenues. Such levies were used after both World Wars, and have been shown that they can be efficient if they are one-off and unavoidable.

However, participants noted that it would take time to introduce such taxes, which could drive avoidance behaviour and make them inefficient. It was also pointed out that many people in the middle-income bracket who have savings in pensions and investment funds will have seen their wealth drop by perhaps 25%, which may make introducing new wealth taxes difficult unless they are focused only on the wealthiest. Nevertheless, a number of the participants thought that wealth taxes and property taxes could be an area for governments to consider.

Solidarity surcharges and taxes on economic rents were mentioned

As regards taxes on income it was suggested that solidarity surcharges could be used – as in Germany and China - although it was queried if these were efficient in the current climate. Another possibility would be to increase corporation tax on residual profits, or rents, which was considered economically efficient.

Building on this discussion, the third roundtable in the series will look ahead to the new reality and what the future may hold. You can view the write-up from the first roundtable in this series here, and if you are interested in taking part in a future roundtable discussion, please email