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Tax Revenue: Swifter Recovery during the Coronavirus Pandemic than during the Global Financial Crisis

DIW Weekly Report 11 / 2022, S. 77-84

Kristina van Deuverden

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Although economic growth continued to be lukewarm in 2021, tax revenue increased significantly, even exceeding the pre-crisis level despite economic policy measures associated with revenue losses. During the 2008-2011 global financial crisis, tax revenue followed a different path: Its recovery lagged behind economic recovery, first reaching the pre-crisis level in 2011. In 2021, value-added tax (VAT) increased as expected following the temporary reduction of the VAT rates in 2020, as did the pay-as-you-earn tax due to the reduction of short-time work. In contrast, taxes on profits have experienced unexpectedly high growth. Clearly, economic policy has stabilized incomes more successfully via rapid and comprehensive measures during the coronavirus pandemic than it did during the global financial crisis. However, price developments are likely to be driving the strong increase in—nominal— profit income. This is one reason that the plans to provide households with relief to help them cope with skyrocketing energy prices and to increase the personal allowance are the right decisions.

Kristina van Deuverden

Research Associate in the Executive Board

JEL-Classification: E62;H20;H30
Keywords: tax revenue, macroeconomic development, corona economic crisis, global financial crisis

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