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How do tax revenues respond to GDP growth? Evidence from developing Asia, 1998–2021

Author

Listed:
  • Samuel Hill
  • Yothin Jinjarak
  • Donghyun Park
  • Maria Hanna Jaber

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 GDP, were close to one before COVID‐19, which is indicative of fiscal sustainability. COVID‐19 had a negative impact on the region's gross domestic product (GDP) and thus its tax base, and spurred a 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 country‐level tax buoyancy coefficients, a counterfactual analysis is undertaken to estimate excess tax revenue losses in 2020 due to COVID‐19. The average GDP‐weighted excess tax revenue loss is about half a percentage point of pre‐pandemic GDP.

Suggested Citation

  • Samuel Hill & Yothin Jinjarak & Donghyun Park & Maria Hanna Jaber, 2025. "How do tax revenues respond to GDP growth? Evidence from developing Asia, 1998–2021," Asian Economic Journal, East Asian Economic Association, vol. 39(2), pages 135-154, June.
    • Handle: RePEc:bla:asiaec:v:39:y:2025:i:2:p:135-154
    DOI: 10.1111/asej.12350
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    References listed on IDEAS

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