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This article provides some preliminary thoughts on tax policy and the COVID-19 crisis. In the first part, it discusses fiscal measures available to policymakers in response to the COVID-19 crisis. The role of taxation will evolve over the different phases of the pandemic: measures have already been adopted to respond to the crisis in the short-term, but questions remain as to the types of measures that should be adopted in the medium and longer-term. In the second part, this article discusses the current and possible future effects of the pandemic on international tax policy. COVID-19, tax policy, international tax reform, transfer pricing, profit shifting, tax and the digital economy.

Digitalization exacerbates the problems faced by the existing system for taxing corporate profit in an international context. It does so by making it much easier for all aspects of a company to be spread around the world: its shareholders and creditors, its operations and its consumers. As many of these problems ultimately stem from the fact that the existing system taxes companies in the location of their mobile factors, this article argues that a more direct and satisfactory response to these problems would be to move to a system in which companies are taxed where their immobile factors are located. The article considers two such possibilities: the location of shareholders and that of consumers. It also considers two specific issues which arise particularly in the context of digital companies, namely two sided markets and free usage.

Transactions designed to avoid statutory provisions bear the legal risk that courts deem them unsuccessful. As this legal risk is a function of the approach courts adopt towards them, identifying and understanding it fully is a sine qua non requirement, without which one simply cannot assess the risk ex ante. Confidence in the robustness of such transactions is based partly on the fact that UK courts characterise transactions according to their legal substance, ignoring factors such as economic substance. Courts have developed an approach in the tax field, the so-called “Ramsay Approach”, which can lead them to look beyond legal substance, but the view seems to be held in some quarters that it cannot be applied outside the tax field. It is argued here that, once its true nature is properly understood, this approach not only can but actually has been applied in a number of corporate law cases.

To operate efficiently and effectively revenue authorities require discretion, but processes must be in place to keep discretion in check. This delicate balancing act takes place against the background of a more general constitutional framework. This chapter outlines the unique features of the UK constitution that form the background to the way in which the discretion of the UK revenue authorities (HMRC) is assessed and controlled. It then discusses a limited, yet crucial, set of discretions vested in HMRC. The chapter focuses particularly on the use of non-statutory guidance. It discusses the operation of judicial review, and in particular, the doctrine of legitimate expectations, in the context of such guidance.