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Analysing the VAT cut pass-through in Spain using web-scraped supermarket data and machine learning

Author

Listed:
  • Nicolás Forteza

    (Banco de España)

  • Elvira Prades

    (Banco de España)

  • Marc Roca

    (Banco de España)

Abstract

On 28 December 2022, the Spanish government announced a temporary Value Added Tax (VAT) rate reduction for selected products. VAT rates were cut on 1 January 2023 and are expected to go back to their previous level by mid-2024. Using a web-scraped dataset, we leverage machine learning techniques to classify each product. Then we study the price effects of the temporary VAT rate reduction, covering the daily prices of roughly 10,000 food products sold online by a Spanish supermarket. To identify the causal price effects, we compare the evolution of prices for treated items (that is, subject to the tax policy) against a control group (food items outside the policy’s scope). Our findings indicate that, at the supermarket level, the pass-through was almost complete. We observe differences in the speed of pass-through across different product types.

Suggested Citation

  • Nicolás Forteza & Elvira Prades & Marc Roca, 2024. "Analysing the VAT cut pass-through in Spain using web-scraped supermarket data and machine learning," Working Papers 2417, Banco de España.
    • Handle: RePEc:bde:wpaper:2417
    DOI: https://doi.org/10.53479/36652
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    References listed on IDEAS

    as
    1. Erwan Gautier & Magali Marx & Paul Vertier, 2023. "How Do Gasoline Prices Respond to a Cost Shock?," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 1(4), pages 707-741.
    2. Irene Monasterolo, 2023. "How inflation varies across Spanish households," Occasional Papers 2307, Banco de España.
    3. AMORES Antonio F. & BARRIOS Salvador & SPEITMANN Raffael & STOEHLKER Daniel, 2023. "Price Effects of Temporary VAT Rate Cuts: Evidence from Spanish Supermarkets," JRC Research Reports JRC132542, Joint Research Centre.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    price rigidity; inflation; consumer prices; heterogeneity; microdata; VAT 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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