This paper was produced as part of the DFID funded Centre for Tax Analysis in Developing Countries (TaxDev) project. TaxDev aims to contribute to more effective tax policy-making in LMICs through applied research and policy analysis, as well as a focus on improving the analytical capacity of partner governments.

Key messages

The coronavirus pandemic is a public health crisis and global economic shock increasingly affecting lower-income countries around the world – external finance from international institutions and development partners can help plug financing gaps, but may become stretched as many countries around the world seek assistance. Governments may need temporary central bank liquidity to finance deficits, but this might not be possible in some countries.

• Tax officials should act now to support the wider government response to coronavirus. 
• Revenue impacts of coronavirus should be assessed and used to inform wider policy responses. 
• Tax policy responses to coronavirus in lower-income countries should aim to provide targeted support, not broad-based stimulus, at least for now. 
• When designing tax policy measures, governments should consider their specific circumstances and constraints. 
• The most effective tax policy measures will be those targeted at specific issues. 
• Tax administrative data can be used to prepare for coronavirus impacts, get an early snapshot of economic health and target policy support. 

This publication is part of ODI’s series on coronavirus. It has not undergone ODI’s usual rigorous peer review and design processes in the interests of rapidly contributing emerging ideas and analysis, and should be read with this in mind.

Report by the Overseas Development Institute