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Macroeconomic Effects Of A Vat Reduction In The Italian Hotels & Restaurants Industry

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  • Mara Manente
  • Michele Zanette

Abstract

The paper tests the effects on the Italian economy of a fiscal measure aimed at lowering the VAT rate from 10% to 5% in the Italian 'Hotels and Restaurants' sector. The analysis focuses first on the impacts in terms of tourism consumption, investments of the sector and public budget. Thereafter, by means of a multiregional-multisectoral input-output model, the increase on the total employment levels by sector and by region has been estimated. Based on a tourism demand elasticity of -1.06 and a supply elasticity of 2.0, tourist nights would increase by a maximum of 3.15% and total tourism consumption by 4.4%, while gross fixed investments by the sector would increase by 2.17%. As for the budget constraint, we have calculated the final 'cost' of the fiscal measure for the Treasury. Concerning the macroeconomic effects in terms of employment, the fiscal measure would produce a total increase of almost 100,000 jobs (expressed in fulltime equivalents).

Suggested Citation

  • Mara Manente & Michele Zanette, 2010. "Macroeconomic Effects Of A Vat Reduction In The Italian Hotels & Restaurants Industry," Economic Systems Research, Taylor & Francis Journals, vol. 22(4), pages 407-425.
    • Handle: RePEc:taf:ecsysr:v:22:y:2010:i:4:p:407-425
    DOI: 10.1080/09535314.2010.526927
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    References listed on IDEAS

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    1. Peter Forsyth & Larry Dwyer, 2002. "Market Power and the Taxation of Domestic and International Tourism," Tourism Economics, , vol. 8(4), pages 377-399, December.
    2. Gooroochurn, Nishaal & Milner, Chris, 2005. "Assessing Indirect Tax Reform in a Tourism-Dependent Developing Country," World Development, Elsevier, vol. 33(7), pages 1183-1200, July.
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    Cited by:

    1. Petr David, 2012. "Distribution of the increased tax burden for agricultural products and food in the Czech Republic," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(5), pages 239-248.
    2. Gerum Alexander, 2014. "Untersuchung der Auswirkungen des ermäßigten Mehrwertsteuersatzes auf den Investitionsstau im bayerischen Beherbergungswesen," Zeitschrift für Tourismuswissenschaft, De Gruyter, vol. 6(1), pages 83-90, May.
    3. Arkadiusz Bernal, 2018. "The Value Added Tax Incidence – the Case of the Book Market in CEE Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(2), pages 144-164, April.
    4. Junguo Shi & Xinyi Yuan & Bert M. Sadowski & Kou Kou & Xuhua Hu & Sihan Li & Shanshan Dou, 2022. "VAT Reform, Regional Ownership Structure, and Industrial Upgrading: Evidence From Firms in Northeast China," SAGE Open, , vol. 12(2), pages 21582440221, April.
    5. Y. Ali, M. Ciaschini & R. Pretaroli & F. Severini & C. Socci, 2014. "Economic relevance of Tourism industry: the Italian case," Working Papers 72-2014, Macerata University, Department of Finance and Economic Sciences, revised Dec 2015.
    6. Rakela Thano, 2013. "Touristic Investments in Saranda Region," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(2), pages 1-9, April.
    7. Rakela Thano, 2013. "Touristic Investments In Saranda Region," Romanian Economic Business Review, Romanian-American University, vol. 8(2), pages 117-130, June.
    8. Stefano Rosignoli & Enrico Conti & Alessandro Viviani, 2013. "Local Impact of Tourism: The Case of Tuscany," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2013(3), pages 89-109.
    9. Oliver Cruz-Milan & Sergio Lagunas-Puls, 2021. "Effects of COVID-19 on Variations of Taxpayers in Tourism-Reliant Regions: The Case of the Mexican Caribbean," JRFM, MDPI, vol. 14(12), pages 1-23, December.

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