Tax revenues are expected to fall significantly in 2021 and 2022 due to Covid-19 according to the European Commission’s latest report on taxation trends in the EU published on Thursday, 24 June.
“Signs of the impact of the Covid-19 pandemic on economies are already starting to show, and it is likely to significantly affect many countries around the world,” it reads.
According to the European Commission’s latest economic forecasts (see EUROPE 12719/2), EU tax revenues are expected to have fallen by around 4% in nominal terms in 2020, even though they have increased as a percentage of GDP because tax revenues have fallen less than GDP.
Thus, the tax-to-GDP ratio is expected to have increased by 0.3 percentage points in 2020 to reach 40.4%, while it is expected to noticeably decrease in 2021—by 0.9 percentage points, down to 39.5%—and to further decrease by 0.3 percentage points in 2022, descending to 39.2%.
This decrease should concern the majority of Member States. In Denmark and the Czech Republic, there could be a decrease of 3 or more percentage points of GDP due to the severe disruption of economic activity.
The European Commission explains that, however, these estimates remain volatile given the dynamic evolution of the pandemic. Various factors—such as the impact of the second and third waves, the deployment of vaccination plans, and the exact impact of national and EU support measures—will have a significant influence on the changes in the economy and tax revenues in 2020 and the years to come.
See the report: https://bit.ly/3jmq09b (Original version in French by Marion Fontana)