We find the long-run tax buoyancy coefficients are close to one in developing Asian economies. This finding suggests that tax revenues respond to changes in GDP consistent with fiscal sustainability. However, the pandemic crisis hurt the region’s tax revenues, subtracting a tenth from the tax-buoyancy coefficient, thus directly reducing revenue growth. Using a counterfactual analysis, the tax revenue lost in 2020 due to the pandemic, over and above what would be in the GDP downturn, is half a percentage point of 2019 GDP for the region. We also estimate tax buoyancy analysis with sub-national government data to extend its applications.

JEL Classification: E62; H20; O53