Estimating VAT Pass Through

42 Pages Posted: 27 Nov 2015

See all articles by Dora Benedek

Dora Benedek

International Monetary Fund (IMF)

Ruud A. De Mooij

International Monetary Fund (IMF); CESifo (Center for Economic Studies and Ifo Institute); Oxford University Centre for Business Taxation

Michael Keen

International Monetary Fund (IMF) - Fiscal Affairs Department; CESifo (Center for Economic Studies and Ifo Institute); Institute for Fiscal Studies (IFS)

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department

Multiple version iconThere are 2 versions of this paper

Date Written: September 2015

Abstract

This paper estimates the pass through of VAT changes to consumer prices, using a uniquedataset providing disaggregated, monthly data on prices and VAT rates for 17 Eurozonecountries over 1999-2013. Pass through is much less than full on average, and differsmarkedly across types of VAT change. For changes in the standard rate, for instance, final passthrough is about 100 percent; for reduced rates it is significantly less, at around 30 percent;and for reclassifications it is essentially zero. We also find: differing dynamics of pass throughfor durables and non-durables; no significant difference in pass through between rateincreases and decreases; signs of non-monotonicity in the relationship between pass throughand the breadth of the consumption base affected; and indications of significant anticipationeffects together with some evidence of lagged effects in the two years around reform. Theresults are robust against endogeneity and attenuation bias.

Keywords: Tax incidence, Price effect, Pass through, consumption, prices, goods, elasticity, value, Incidence, Business Taxes and Subsidies,

JEL Classification: -;- E31, E31, H22, H22, H25, H25

Suggested Citation

Benedek, Dora and De Mooij, Ruud A. and Keen, Michael and Wingender, Philippe, Estimating VAT Pass Through (September 2015). IMF Working Paper No. 15/214. Available at SSRN: https://ssrn.com/abstract=2696093

Dora Benedek (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Ruud A. De Mooij

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Oxford University Centre for Business Taxation ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

HOME PAGE: http://people.few.eur.nl/demooij/

Michael Keen

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States
202-623-9831 (Phone)
202-623-4199 (Fax)

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