Revenue shortfalls from domestic and trade taxes in the wake of COVID: evidence from Eswatini, Rwanda, Uganda, Sierra Leone and South Africa
Since having been declared a global pandemic in March 2020, Covid-19 has altered the daily life of the vast majority of the world population, with major impacts on its health and livelihood. While Sub-Saharan Africa (SSA) was not amongst the first regions to be hit, cases have been reported in all of its countries since April. The vast majority of them have introduced both measures of social distancing and some support schemes for household and firms. While distancing measures are deemed essential to contain the spread of the virus, they also contribute to an economic crisis that is set to be one of the worst in recent history. The OECD estimates that each month of lockdown reduces GDP growth by 2% (OECD 2020). Growth rates of low-income countries for 2020 have already been revised downward to 0.4% from a pre-COVID level of 5.1% (IMF 2020). Africa is set to face the first recession in the last quarter of a century.
Building on the ongoing collaboration with the World Bank and the Institute for Fiscal Studies, ICTD will bring our capacity to access tax administration data from different African countries to this research consortium, in order to provide an initial micro-founded assessment of the pandemic on tax revenue in the African context. By looking at five different countries, we can draw comparative considerations that might be generalisable to other countries too. Specifically, we will investigate how the current pandemic impacts firms’ profitability and survivability, and then move to assess how these shocks translate into government revenue shortfalls, considering the impact on both CIT. We will also provide an analysis of which trade patterns have been impacted more importantly by the current disruption, and attempt to connect domestic developments in trade partners’ economies to future resumption of normal flow of goods.