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Buoyant or Sinking? Tax Revenue Performance and Prospects in Developing Asia

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Listed:
  • Hill, Samuel

    (World Bank)

  • Jinjarak, Yothin

    (Asian Development Bank)

  • Park, Donghyun

    (Asian Development Bank)

Abstract

How did developing Asian economies perform with respect to tax revenue mobilization before and during the coronavirus disease (COVID-19) pandemic? An analysis of data from developing Asia suggests that both short-run and long-run tax buoyancies, a measure of how tax revenue responds to gross domestic product (GDP), were close to one before COVID-19, which is indicative of fiscal sustainability. COVID-19 had a negative impact on the region’s GDP and thus its tax base, and spurred significant fiscal stimulus including tax measures. At a regional level, the pandemic subtracted a tenth of a percentage point from tax revenue growth after controlling for changes in GDP. Using estimated economy-level tax buoyancy coefficients, a counterfactual analysis is undertaken to estimate excess tax revenue losses in 2020 because of COVID-19. The average GDP-weighted excess tax revenue loss is about half a percentage point of pre-pandemic GDP.

Suggested Citation

  • Hill, Samuel & Jinjarak, Yothin & Park, Donghyun, 2022. "Buoyant or Sinking? Tax Revenue Performance and Prospects in Developing Asia," ADB Economics Working Paper Series 656, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0656
    as

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    References listed on IDEAS

    as
    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
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    More about this item

    Keywords

    tax collection; business cycles; pandemic crisis;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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