Economics in a picture
In 2020, structural tax revenue increased as a percentage to GDP, reflecting the resilience of tax bases
Structural revenue from taxes and social contributions corresponds to the part of actual revenue that does not reflect cyclical fluctuations. Its change as a ratio to potential GDP can be broken down on the basis of a methodology adopted in the Eurosystem allowing the identification of the contributions of tax measures, the progressivity of the Personal Income Tax and composition effects. According to this methodology, any other driving factors are captured in a residual component.
In 2020, contrary to developments in previous recessions, structural revenue from taxes and social contributions increased its share in potential GDP, notwithstanding the implementation of measures leading to a decline in collection. This increase is largely driven by composition effects related to the Personal Income Tax and social contributions resulting from the fact that the wage bill evolved more favourably than what would be expected given historical elasticities with respect to GDP. This reflects support measures targeting households and firms implemented during the crisis. The residual component also exhibited a positive contribution in 2020, largely stemming from revenue from taxes on corporations. In particular, although revenue from the corporate income tax evolved in line with the respective macroeconomic bases and historical elasticities, the identification as a measure of the possible suspension of the first two prepayments yields a positive residual of similar magnitude.
For more details see Box 3 “Structural developments in tax and contributory revenue” in the May 2021 Economic Bulletin of Banco de Portugal and Braz et al. (2019), “The new ESCB methodology for the calculation of cyclically adjusted budget balances: an application to the Portuguese case”, Economic Studies, Banco de Portugal, Vol. V – No 2, April.
Prepared by Maria Manuel Campos. The analyses, opinions and results expressed herein are those of the author and do not necessarily coincide with those of Banco de Portugal or the Eurosystem.
If you want to receive an e-mail whenever a new “Economics in a picture” is published send your request to firstname.lastname@example.org.
25.06.2021 - Economics in a picture: In 2020 prices increased more for households in the low consumption group
18.06.2021 - Economics in a picture: The combined effect of the shocks generated by the pandemic crisis led to a reduction in the euro area inflation in 2020
11.06.2021 - Economics in a picture: Fiscal measures have contained the effects of the pandemic shock on households and corporations