The COVID-19 crisis more than the global financial crisis (GFC) poses significant challenges to fiscal policies. Government around the world, in response to the COVID-19 epidemic (shutdowns, layoffs, and firm exits), have taken extraordinary measures to tame the pandemic and to mitigate its recessionary impact (boost demand and limit job losses is the motto).
Fiscal policy is the macroeconomic stabilization instrument used by the government. Main tools of fiscal policy are government expenditures (consumption and investment spending…) and tax revenues (on Resource related revenues and non-resource revenues (e.g Corporate income taxes; incorporate income taxes; VAT; International trade taxes)).
Examples of Fiscal policies during COVID-19 crisis in France: (i) liquidity support through postponements of social security and tax payments for companies and accelerated refund of tax credits (e.g. CIT and VAT); (ii) support for wages of workers under the reduced-hour scheme (Source: IMF)
CJEA