The Impact of COVID-19 on Formal Firms: Micro Tax Data Simulations across Countries

Pierre Jean Bachas, Anne Brockmeyer and Camille Marine Semelet

No 9437, Policy Research Working Paper Series from The World Bank

Abstract: How is the COVID-19 pandemic affecting firm profits and tax payments in developingcountries This paper uses administrative corporate tax records from 10 low- and middle-income countries around theworld to provide plausible estimates. Modeling the lockdown-triggered revenue shock with simple and transparentassumptions, the analysis predicts that less than half of all firms will remain profitable by the end of 2020, about5-10 percent of the formal aggregate annual payroll will be lost, and firm exit rates will double. As a result, it isexpected that tax revenue remitted by the corporate sector will fall by at least 1.5 percent of baseline gross domesticproduct. Differences in sectoral composition and firms' cost structures generate heterogeneity in the results acrosscountries: wage subsidies are less effective in low-income countries and government revenue losses are smaller.

Keywords: Labor Policies; Rural Labor Markets; Labor Markets; Plastics & Rubber Industry; Pulp & Paper Industry; Textiles; Apparel & Leather Industry; General Manufacturing; Construction Industry; Common Carriers Industry; Food & Beverage Industry; Business Cycles and Stabilization Policies; Employment and Unemployment; International Trade and Trade Rules (search for similar items in EconPapers)
Date: 2020-10-14
New Economics Papers: this item is included in nep-iue
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Citations: View citations in EconPapers (9)

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