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Pass-through of Per Unit and ad Valorem Consumption Taxes: Evidence from Alcoholic Beverages in France

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  • Clément Carbonnier

    (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

Abstract

Economic theory states that in a market with imperfect competition, per unit consumption taxes should induce a greater increase in prices than ad valorem consumption taxes. This implies that consumers bear a greater share of the tax burden with per unit consumption taxes than that with ad valorem consumption taxes. This article seeks to test this theoretical result empirically using the French market for alcoholic beverages, which is subject to both per unit (excise taxes) and ad valorem (value-added tax, VAT) consumption taxes. Econometric analysis is applied to two consumption tax reforms affecting two distinct French markets for alcoholic beverages, those for beer and for aperitif. In 1995, the full rate of VAT increased from 18.6 to 20.6%; excise taxes on alcoholic beverages increased in 1997. Graphical evidence and econometric results confirm the statements of economic theory. For both classes of alcoholic beverages – beer and aperitif – the change in prices due to per unit excise taxes was significantly larger than that due to ad valorem VAT.
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Suggested Citation

  • Clément Carbonnier, 2013. "Pass-through of Per Unit and ad Valorem Consumption Taxes: Evidence from Alcoholic Beverages in France," Post-Print hal-02979494, HAL.
    • Handle: RePEc:hal:journl:hal-02979494
    DOI: 10.1515/bejeap-2013-0047
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    Cited by:

    1. Asatryan, Zareh & Gomtsyan, David, 2020. "The incidence of VAT evasion," ZEW Discussion Papers 20-027, ZEW - Leibniz Centre for European Economic Research.
    2. Sébastien Lecocq & Valérie Orozco & Christine Boizot‑Szantai & Céline Bonnet & Fabrice Etilé, 2023. "Alcohol Price Regulation in France: Choosing a Reform Scenario to Achieve Public Health and Tax Fairness Objectives," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 541, pages 17-32.
    3. Pascal Belan & Clément Carbonnier & Martine Carré, 2017. "Tax devaluation with endogenous margins," Working Papers hal-01515806, HAL.
    4. Lindé, Jesper & Pescatori, Andrea, 2019. "The macroeconomic effects of trade tariffs: Revisiting the Lerner symmetry result," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 52-69.
    5. Sebastien Bradley & Naomi E. Feldman, 2020. "Hidden Baggage: Behavioral Responses to Changes in Airline Ticket Tax Disclosure," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 58-87, November.
    6. Aria Ardalan & Sebastian G. Kessing, 2021. "Tax pass-through in the European beer market," Empirical Economics, Springer, vol. 60(2), pages 919-940, February.
    7. Carbonnier, Clément, 2014. "The incidence of non-linear price-dependent consumption taxes," Journal of Public Economics, Elsevier, vol. 118(C), pages 111-119.
    8. Pascal Belan & Clément Carbonnier & Martine Carré, 2021. "Fiscal Devaluation with Endogenous Markups: Productivity and Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(4), pages 1159-1189, October.
    9. Hindriks, Jean & Serse, Valerio, 2019. "Heterogeneity in the tax pass-through to spirit retail prices: Evidence from Belgium," Journal of Public Economics, Elsevier, vol. 176(C), pages 142-160.
    10. Pranvera Shehaj & Martin Zagler, 2023. "Motor Vehicle Registration Taxes (MVRT) across EU countries: MNEs’ profitability and the role of market concentration," European Journal of Law and Economics, Springer, vol. 56(1), pages 155-198, August.
    11. Gabriel RAITA, 2021. "A Theoretical Approach Of The Fiscal System In Romania," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(23), pages 1-5.
    12. Vinish Shrestha & Sara Markowitz, 2016. "The Pass-Through Of Beer Taxes To Prices: Evidence From State And Federal Tax Changes," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1946-1962, October.
    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).
    14. Andrew Hanson & Ryan Sullivan, 2016. "Incidence and Salience of Alcohol Taxes," Public Finance Review, , vol. 44(3), pages 344-369, May.
    15. Nelson Jon P. & Moran John R., 2020. "Effects of Alcohol Taxation on Prices: A Systematic Review and Meta-Analysis of Pass-Through Rates," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-21, January.
    16. Ce Shang & Anh Ngo & Frank J. Chaloupka, 2020. "The pass-through of alcohol excise taxes to prices in OECD countries," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(6), pages 855-867, August.

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