Stimulus packages for Covid-19 may lead to higher taxes in future, according to leading macroeconomic influencers

GlobalData Thematic Research 12 May 2020 (Last Updated May 12th, 2020 08:54)

Stimulus packages for Covid-19 may lead to higher taxes in future, according to leading macroeconomic influencers

The lockdown measures imposed due to the Covid-19 pandemic has affected countries across the world with decline in revenues, high unemployment rates and economic uncertainty. Governments are releasing stimulus packages to combat the impact but this may lead to higher taxes and debt, which will further burden people after the crisis.

Prof. Steve Hanke

Prof. Steve Hanke, Applied Economist at Johns Hopkins University, tweeted an article on the stimulus packages announced by the government and its consequences. He noted that the US government has already created $1.48tn in deficit in 2020 and is still planning to announce more stimulus packages.

Hanke noted that future taxpayers will have to bear the hefty costs of the stimulus packages being announced by the government.

Isaah Mhlanga

Isaah Mhlanga, chief economist at Alexander Forbes, tweeted on how debt financing due to Covid-19 will lead to increase in taxes in the future. He shared an article on how Saudi Arabia has tripled VAT from 5% to 15% to support the economy and suspended cost of living allowance.

The measures were implemented as the country had a $9bn (£7.2bn) budget deficit in the first quarter of 2020 in addition to fall in oil revenues by 22%.

Tim Harcourt

Tim Harcourt, an economist and author, shared an article how working from home can mitigate the impact of the Covid-19 pandemic. According to the International Labour Organization, only 7.9% of the global workforce worked from home before the pandemic.

After the pandemic, the number of workers who are working from home has increased dramatically. In Argentina, for example, 93% of the workforce adopted teleworking. The article adds that workers in advanced economies are more capable of working from home rather than developing nations where the job profile did not allow work from home.

Gregory Daco

Gregory Daco, Chief US Economist at Oxford Economics, tweeted a chart on temporary jobs. He noted that those temporary jobs, which have been lost due to the coronavirus pandemic, are likely to turn be permanently lost as due to the recession caused by the pandemic.