Tax Policies after Crises


Little is known about how policymakers adjust tax policies in response to crises. We use novel and granular data on reforms of tax rates and tax bases for
six tax types (22 developed and emerging economies, 1962-2014) and examine tax policies in late stages of crises. Our sample covers 217 severe crises, including
financial crises, natural disasters, and economic recessions. The results show that governments tend to increase taxes after crises. The effect is particularly large
for financial crises and natural disasters. Tax increases occur mostly during the first post-crisis year and mainly affect corporate and personal income taxes and
the VAT. Paradoxically the extent of the tax hikes is decreasing in the pre-crisis level of public debt.