COVID clantag?? Seriously?

banning is not a great thing cause then anything offensive is next.. block the player bann things that are really harmful

I agree with you that it is in poor taste. I would report them to Microsoft and in the game you are playing. If the clan tag is not part of their gamertag there is not much Microsoft can do, but the game company that maintains the game can.

There's been a lot of gamer tags around COVID-19, as well as clan tags being made now. The best option you can do is report the player on that specific platform.

Not up to Xbox if it is in game. You should report both in game and on their profile. It is up to the developer the restrict their clan tags which they mostly do. To learn more about enforcement please visit Enforcement

I can understand, that it could be offensive for some people. As already mentioned all you could do is to block, report and mute the gamertag which is offensive for you.