The impact of the COVID-19 pandemic on tax revenues in the EU

Abstract

The COVID-19 pandemic has led to an economic crisis with far-reaching effects throughout the entire world. In the EU, governments face the need for policies that will counter the negative economic effects. To do this, they require reliable tax revenue predictions to help plan and finance policies that will set the European economies on the road to recovery. The current study aims to offer up-to-date accurate forecasts of tax revenues for the 27 EU member states for the period 2020-2022. A time trend model regression model adjusted with the unemployment rate is estimated for each member state using data for the period 1995-2019. Based on this regression model, forecasts for tax revenues are made. The results show a decline in tax revenues in 2020 and 2021 followed by a slight recovery in 2022 for most EU member states. The study also offers fiscal policy recommendations for the EU aimed at improving and stabilizing tax revenue collection in the future.