Abstract
The aim of this study is to analyze the connection between anti-crisis fiscal measures adopted by EU governments in response to the COVID-19 pandemic and these countries’ GDP growth. The study relies on methods of statistical analysis, including cluster analysis, to examine the challenges of forecasting tax revenue collections during the COVID-19 pandemic. It is possible to make preliminary conclusions regarding the relationship between fiscal anti-crisis measures in EU countries and these countries’ GDP growth even in the absence of the actual data. The study has revealed variations in forecast GDP growth caused by a higher than usual degree of uncertainty. The best way to minimize such variations is to constantly monitor the situation and adjust the forecast estimates depending on the changes in the relevant factors. The variations in forecast estimates can also stem from adjustments for the changes in tax revenues of EU countries implementing fiscal anti-crisis measures. Most EU countries resorted to such instruments as deferral of certain tax payments, temporary tax breaks, reduction of tax rates, tax loss carryforwards, cancellation or reductions of social contributions. The European leaders in terms of anti-crisis fiscal measures are the Czech Republic and Ireland – these countries used four out of five instruments and were followed by Austria, Hungary and the UK, which used three instruments. We also analyzed the coefficient of tax elasticity for European countries and demonstrated that tax reliefs (tax preferences) influence the level of tax revenue. The hypothesis that there is an indirect connection between the anti-crisis fiscal measures and GDP growth was confirmed. It is shown that clusters of EU countries grouped depending on their anti-crisis fiscal measures do not coincide with the clusters of countries grouped depending on their GDP growth estimates. Thus, a tentative forecast can be made that the fiscal anti-crisis measures taken by EU countries will not have a direct impact on their GDP growth.
Highlights
The COVID-19 pandemic has changed the world in many ways and severely disrupted the global economy
Our study has brought to light challenges in forecasting tax revenue due to the uncertainty surrounding the COVID-19 pandemic
Elasticity cannot be considered a reliable indicator for tax revenue forecasts due to the higher-than-usual degree of uncertainty during the pandemic, we can still argue that there is an indirect relationship between fiscal anti-crisis measures in European Union (EU) countries and GDP growth
Summary
The COVID-19 pandemic has changed the world in many ways and severely disrupted the global economy. The European Union (EU) took vigorous action to tackle the negative effects of the pandemic in such spheres as health care, economy, research, border mobility, etc The documents regulating these policies are available on the official EU website. A key role in this respect is played by fiscal anti-crisis measures, which can have short-term as well as long-term economic effects. These effects are quite complex and can be found in different spheres, which is why they can be difficult to evaluate. The fiscal anti-crisis measures taken by EU countries have no influence on indicators of GDP. The final section contains our conclusions and outlines the avenues for future research
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