OECD, BRICS Countries must mitigate Covid-19 fallout through targeted measures / Antonina Levashenko, Kirill Chernovol, Alexandra Koval

No matter what approach we use to identify the potential impact on global and national economies from the Covid-19 pandemic, the prognoses are not optimistic.

© Александр Корольков, Российская газета, 2020

Alexandra Koval has a master degree in law of international trade. She has worked as a researcher in Russian Foreign Trade Academy (RFTA) under Ministry of economic development of Russian Federation

Kirill Chernovol is a specialist in constitutional law with a qualification of a pre-doctoral researcher. He has a background of working in project offices of the Ministry of economic development and the Ministry of Finance of the Russian Federation

Antonina Levashenko worked as a researcher in Gaidar Institute for Economic Policy, as a lawyer and senior researcher in The Russian Presidential Academy of National Economy and Public Administration (RANEPA), as a senior researcher in Russian Foreign Trade Academy (RFTA)

According to the OECD, with businesses temporarily shut down and various other containment measures in place, the most adversely affected sectors seem to be travel, retail, restaurants and cinemas, non-essential construction work, and, to a smaller extent, the manufacturing industry. The affected sectors account for between 30-40 percent of total output in most economies. Allowing for only partial shutdowns in some sectors, and assuming a similar extent of closures in all countries, the overall initial direct hit to GDP levels is expected to be between 20-25 percent in many advanced economies. For the BRICS countries, the OECD predicts a potential GDP decline at constant prices of over 20 percent in Brazil and India, 23 percent in Russia, about 19 percent in China, and 17 percent in South Africa as a result of the shutdowns. In China’s case, however, the OECD estimates that the peak adverse impact on output has already past, with some shutdown measures now being eased. Nevertheless, such predictions call for all governments to take steps to prevent the most adverse and long-lasting consequences on their economies caused by current global epidemiologic circumstance.

Health systems’ response

Arguably, health systems the world over are facing the most severe immediate challenges to contain and mitigate the spread and infection rate of Covid-19. Beyond containment, there is a critical need to provide additional measures, including but not limited to financial and R&D, to ensure proper treatment and efficiently reduce the pressure on healthcare systems.

The OECD has outlined four key measures that should be put into place in response to the pandemic: ensuring that the vulnerable have access to diagnostics and treatment; strengthening and optimising the capacity of health systems; providing the means to leverage digital solutions and data; and aiding improvements in R&D for the accelerated development of diagnostics, treatments, and vaccines. Countries must mobilise their national “sanitary reserves” to increase the supply of health workers by involving retired health professionals and students in medical and other health programs voluntarily, as has been done in France and Russia.

India has announced an emergency health fund of INR 150 billion (US$ 2 billion) to treat Covid-19 patients and strengthen the medical infrastructure, including rapidly ramping up the number of testing facilities, personal protective equipment, isolation beds, ICU beds and ventilators. Russia has adopted measures to encourage medical professionals by budgeting bonuses for working with infected patients, as well as allowing delivery options for over-the-counter medicines purchased online. 

Taxation policies

The Covid-19 pandemic is putting pressure on businesses, especially small and medium-sized enterprises (SMEs). The governments of the OECD and BRICS countries are looking for ways to protect their citizens and economies. It is essential to provide support to households and to improve the cash-flow for businesses. The OECD has prioritised work on a range of targeted and temporary tax policy and tax administration measures that governments could consider as part of their response to the Covid-19 pandemic. Some of the measures governments could consider are delaying the payment of taxes and introducing temporary VAT reductions or deferrals.

China has announced VAT exemptions for “lifestyle services,” increasing loss carry-forward for severely affected businesses in specific sectors (transport, catering, accommodation, and tourism).  Russia has also adopted tax incentives in respond to Covid-19, including a moratorium on SME tax audits; a deferral on the collection of tax payments for taxpayers from air transport, tourism, sports, art, culture, and cinema; a three-month delay in rental fees for SMEs that rent state and municipal premises; businesses can defer payments for all taxes except VAT; and micro-enterprises can delay their contributions to social funds.

Read more in the source: https://www.orfonline.org/expert-speak/oecd-brics-countries-must-mitigate-covid-19-fallout-through-targeted-measures-64267/