Governments to implement tax-raising measures

As much as governments want to raise sufficient revenue through tax payments, it could make society in emerging markets worse off.

14 October 2020 | Economics

The Covid-19 pandemic will cause long-lasting revenue losses for African and other Emerging Markets (EMs) and governments' ability to implement effective revenue-raising measures will be an important credit driver over the next few years.

This is contained in the Moody’s Investors Services report which indicated that almost all EMs will record budget deficits this year and face constraints in cutting spending amid the pandemic,.

“EMs fiscal revenue will stay below pre-crisis levels amid a slow and halting global recovery. On average, EMs governments will lose revenue worth 2.1 percent points of Gross Domestic Product in 2020, above the 1.0 percent point loss in Advanced Economies (AEs).

For EMs, any fall in revenue is particularly important for creditworthiness because their government spending needs, social, infrastructure and debt financing are often more urgent than for AEs and they have a generally narrower revenue base, it adds.

The report further said that with the support of development finance institutions, EMs governments will look to implement tax-raising measures. However, only a few governments have successfully raised revenue much faster than GDP growth over the last 10 years. - Nampa

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