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Analysing the VAT Cut Pass-Through in Spain Using Web Scraped Supermarket Data and Machine Learning

Author

Listed:
  • Nicolás Forteza
  • Elvira Prades
  • Marc Roca

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 January 1, 2023 and are expected to go back to their previous level by mid-2024. Using a web-scraped data set, we leverage machine-learning techniques to classify each product according to categories of the official classification by the statistical office (COICOP5). Then we study the price effects of the temporary VAT rate reduction covering the daily prices of roughly 10,000 food products sold on-line by a Spanish supermarket. To identify causal effects, we compare the evolution of prices for treated items (that is, subject to the tax policy) against a control group (food items out of 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 951, Banque de France.
    • Handle: RePEc:bfr:banfra:951
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    References listed on IDEAS

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    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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