An Empirical Study of Tax Policies after (Economic) Crises

Tasks

It is important to understand how tax policies have changed after national crises (economic and financial crises as well as natural disasters) to identify successful tax policy strategies in the aftermath of crises and to draw inferences regarding the current Covid-19 pandemic. Little is known from theory or previous empirical studies about which types of taxes change after crises and which tax strategy best facilitates economic recovery after crises.

Our research closes the gap in the literature. Our project examines two questions: (i) How did tax policies (tax base and tax rate) of governments change after crises? Which types of taxes have been changes after crises? (ii) Which tax policies have been successful regarding key economic indicators?

Results

The results show that governments increased taxes after national crises. The effect is particularly large for financial crisis and natural disasters, manifests mostly during the first post-crisis year and mainly affects corporate and personal income taxes and the VAT. The increase in tax rates after crises has been accompanied by lower overall economic growth in the aftermath of crises. This was particularly true after financial crises.