By Joseph Boris

Law360 (May 26, 2020, 8:14 PM EDT) -- Recovery from the COVID-19 pandemic's economic damage will be a long process requiring crucial input from tax administrations, the Organization for Economic Cooperation and Development said Tuesday in analyses that also showed contraction of its members' gross domestic product.

In two pandemic-related reports — one on tax administrations' responses so far and recovery planning to come, the other on associated privacy and fraud risks — the OECD's Forum on Tax Administration forecast a potentially prolonged, uncertain and complex process while identifying challenges and opportunities for national tax administrators.

Separately, the organization issued a brief analysis showing that among its 37 member countries, GDP fell by 1.8% on average in this year's first quarter, the steepest year-on-year decline since the 2.3% contraction in the first three months of 2009, at the height of the global financial crisis.

The OECD's provisional estimates of the impact on GDP since the introduction this spring of efforts worldwide to contain the novel coronavirus, which causes the respiratory disease COVID-19, reported significant drops among the organization's so-called major seven economies. In two European countries where government lockdown measures were particularly strict and enacted early, GDP was down 5.8% in France and 4.7% in Italy from the first quarter a year ago.

GDP also fell sharply in Canada, by 2.6%, in Germany, by 2.2%, and in the United Kingdom, by 2%, according to the OECD. In the U.S., though, where many states introduced stay-at-home restrictions in late March, the contraction was by a less drastic 1.2%, the organization said.

In Japan, where containment efforts have been less stringent, GDP contracted by 0.9% in the quarter, while declines were by 3.3% in the European Union and by 3.8% in its 19-nation euro currency area, the organization's research showed.

Governments around the world have enforced lockdown policies in an attempt to curtail the spread of the virus, which as of Tuesday had killed just over 350,000 people. Despite historic tax and fiscal stimulus policies rolled out by governments in an effort to reduce the pandemic's economic impact, the toll of the crisis will likely continue to weigh on global GDP, analysts have said, with the World Bank forecasting a worldwide GDP contraction of 5% this year.

According to the report on responses to and recovery planning for COVID-19, even during the immediate crisis, national tax administrations as well as taxpayers will benefit significantly from taking early moves to identify and carry out economic restoration work.

"It will be important to take into account the distinguishing features of the COVID-19 pandemic compared to other crises that are likely to persist during the recovery period," the report stated.

The report cited "continued risks to health, including from further outbreaks; the impacts on staff and administration systems as a result of the need for continuing adjustments; and the potential length and volatility of the recovery period given the depth and scale of the economic shock."

The Intra-European Organization of Tax Administrations and the Inter-American Center of Tax Administrations contributed to the report.

The other OECD report, on the privacy, disclosure and fraud risks tied to the pandemic that tax administrators face, highlighted increased security concerns and greater opportunities for errors, misconduct and fraud, including that as a result of increased remote work. The report noted examples of these high-level risks and identified some mitigating actions that tax administrations may wish to take.

An OECD representative didn't respond to a request for comment beyond the analyses.

--Editing by John Oudens.

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