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Varieties of VAT pass through

Author

Listed:
  • Dora Benedek

    (International Monetary Fund)

  • Ruud A. Mooij

    (International Monetary Fund)

  • Michael Keen

    (International Monetary Fund)

  • Philippe Wingender

    (International Monetary Fund)

Abstract

This paper exploits a unique dataset (monthly observations on consumer prices and VAT rates for around 70 commodity groups in 17 Eurozone countries over 1999–2013) to identify the extent of pass through for several types of VAT change—including (a key concern, previously unaddressed) in the standard VAT rate. The impact on consumer prices proves to vary systematically and sharply across these different types of VAT reform. For example, the usual presumption of full pass through is broadly confirmed for changes in the standard rate, but pass through for reduced rates appears to be generally noticeably lower. The results are robust against endogeneity and attenuation bias.

Suggested Citation

  • Dora Benedek & Ruud A. Mooij & Michael Keen & Philippe Wingender, 2020. "Varieties of VAT pass through," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 890-930, August.
    • Handle: RePEc:kap:itaxpf:v:27:y:2020:i:4:d:10.1007_s10797-019-09566-5
    DOI: 10.1007/s10797-019-09566-5
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    References listed on IDEAS

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    Cited by:

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    2. Buettner, Thiess & Madzharova, Boryana & Zaddach, Orlando, 2023. "Income tax credits for consumer services: A tool for tackling VAT evasion?," Journal of Public Economics, Elsevier, vol. 220(C).
    3. Kaplanoglou, Georgia, 2022. "Consumption inequality and poverty in Greece: Evidence and lessons from a decade-long crisis," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 244-261.
    4. Gómez-Antonio, Miguel & del Moral Arce, Ignacio & Hortas-Rico, Miriam, 2022. "Are VAT reforms an effective tool for promoting culture? A quasi-experiment in Spain," Journal of Policy Modeling, Elsevier, vol. 44(5), pages 1016-1040.
    5. Michael Reiter & Adrian Wende, 2024. "Generalized Rotemberg Price-Setting," CESifo Working Paper Series 11297, CESifo.
    6. Josef Baumgartner & Gabriel Felbermayr & Claudia Kettner-Marx & Angela Köppl & Daniela Kletzan-Slamanig & Simon Loretz & Margit Schratzenstaller-Altzinger, 2022. "Stark steigende Energiepreise – Optionen für eine Entlastung von Haushalten und Unternehmen," WIFO Research Briefs 6, WIFO.
    7. Michael Christl & Andrea Papini & Alberto Tumino, 2020. "Heterogeneity in effective VAT rates across native and migrant households in France, Germany and Spain," JRC Working Papers on Taxation & Structural Reforms 2020-09, Joint Research Centre.
    8. Dovern, Jonas & Frank, Johannes & Glas, Alexander & Müller, Lena Sophia & Perico Ortiz, Daniel, 2023. "Estimating pass-through rates for the 2022 tax reduction on fuel prices in Germany," Energy Economics, Elsevier, vol. 126(C).
    9. Shiraishi, Kosuke, 2022. "Determinants of VAT pass-through under imperfect competition: Evidence from Japan," Japan and the World Economy, Elsevier, vol. 61(C).
    10. Sieg, Gernot & Wessel, Jan, 2022. "I would if I could: Passing through VAT reductions in the german rail industry," Economics of Transportation, Elsevier, vol. 32(C).
    11. Michał Przybyliński & Artur Gorzałczyński, 2022. "Applying the input–output price model to identify inflation processes," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-11, December.
    12. Lydia Dimitrakopoulou & Christos Genakos & Themistoklis Kampouris & Stella Papadokonstantaki, 2023. "VAT Pass-Through and Competition: Evidence from the Greek Islands," Discussion Papers of DIW Berlin 2039, DIW Berlin, German Institute for Economic Research.
    13. Fedoseeva, Svetlana & Van Droogenbroeck, Ellen, 2024. "Temporary VAT rate cuts and food prices in e-commerce," Journal of Retailing and Consumer Services, Elsevier, vol. 77(C).

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    More about this item

    Keywords

    Value-added tax; Tax incidence; Price effect; Pass through;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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