In many developing economies, additional tax revenue is needed to meet growing demands for public goods and services, and support development goals. An estimate suggests that achieving the Sustainable Development Goals in key areas requires additional spending by 2030 of $0.5 trillion for low-income developing countries and $2.1 trillion for emerging market economies….
In this study, we focus on developing economies in Asia, and estimate the short-run and long-run association between tax revenue and output with panel and time-series analyses….
The panel results suggest that both short-run and long-run tax buoyancies coefficients are above one. We then apply the regression coefficients to obtain estimates of revenue loss because of Covid-19. Specifically, we first estimate a time-series model with 1998-2019 data. We then compare model predictions of revenues from 2015 to 2020 with actual data to assess the impact of Covid-19 over and above what would normally be expected, given the GDP downturn. We find that tax revenue fell more than the model’s predictions in many economies, while in a few economies, predicted actual revenues are very close. Averaged and GDP weighted across 24 economies, the estimated excess revenue loss of developing Asia amounted to -0.5% of 2019 GDP in 2020.
From ‘How do Tax Revenues Respond to GDP Growth? Evidence from Developing Asia, 1998-2020′, Asian Development Bank