By Joseph Boris

Law360 (April 14, 2020, 8:24 PM EDT) -- Work toward a global tax on corporations' digital operations should be suspended so that countries can devote time and resources to rebuilding their economies from the coronavirus pandemic, two tax policy researchers said in a new study.

For the Organization for Economic Cooperation and Development, "now would be a good time to hit the pause button" on the negotiations, Scott Hodge and Daniel Bunn of the Tax Foundation said in research published Monday. They recommended that the talks wait until the global economy has returned to stability with 2% annual growth for two consecutive years.

"Only in the context of a healthy global economy would further discussions of a global digital tax fix make sense," said the researchers at the Tax Foundation, a right-leaning think tank in Washington, D.C.

The OECD, following a mandate from the Group of 20 leading economic powers, has been planning to reach a consensus on overhauling corporate tax rules by the end of this year. That deadline still stands despite the ongoing pandemic, Pascal Saint-Amans, the organization's tax policy chief, told Law360 in late March.

Hodge and Bunn said tax policymakers have shifted their focus to the current public health crisis and may be unable to commit the necessary time to evaluating the impact of the OECD's proposal on their economies. Also, once the crisis has subsided, those responsible for tax policy will need to turn their attention to designing pro-growth agendas in the context of sustainable public finances, they said.

"For every country that would stand to gain revenue under the OECD's proposals — such as France or India — other countries risk losing revenue — Ireland and the United States among them," the researchers said. "The losers may be even less willing to move forward in negotiations without having the time to understand the full ramifications of the proposals."

While acknowledging the huge debts governments around the world are incurring to resuscitate their economies, Hodge and Bunn said that "raising taxes indiscriminately" to repay these debts is riskier than pursuing pro-growth policies. Other analysts have said the OECD proposal, particularly the second of its two pillars calling for a global minimum tax on corporations, could prove attractive as a revenue-raising measure even amid the pandemic.

But Hodge and Bunn asserted that corporate income taxes are the "most volatile revenue source" available to national tax administrators. Implementing new global rules targeted at highly profitable business models would likely exacerbate volatility for businesses and countries alike, they said.

They applauded the Paris-based OECD for committing resources to help governments address the pandemic, provide tax relief and promote long-term pro-growth reforms. But once the crisis abates, the organization should reemphasize growth as a priority to help economies get back on track.

"Instead of implementing complex new international rules, countries at the OECD should focus on building a consensus on reducing international tax barriers," the researchers said. "The global community should recognize that the digital project is not only leading to bad tax policies, but it is putting the desire for tax revenues over the need for economic growth."

Bunn and Hodge both declined to comment beyond their essay.

--Editing by Neil Cohen.

Update: This article has been updated to add that Hodge declined to comment.

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