How Much Does Mobility Matter for Value-Added Tax Revenue? Cross-Country Evidence around COVID-19

30 Pages Posted: 6 Feb 2023

See all articles by Lucas Rosso

Lucas Rosso

University of Chile

Rodrigo Andres Wagner

UAI Business School ; Growth Lab - Harvard University (Center for Int. Development)

Date Written: February 3, 2023

Abstract

Countries need to evaluate both costs and benefits when mandating mobility restrictions for their population. This paper studies one edge of this debate. Namely, to what extent mobility reductions and confinement measures impact Value Added Tax (VAT) collection, which is an increasingly important type of fiscal revenue. Using evidence across twenty nations and over time, we measure these effects around the COVID-19 Pandemic. For that, we benefit from the novel IDB-CIAT monthly dataset on aggregate VAT revenues (2019-2020), combining it with both mobility-restriction policies and mobility outcomes. On average, monthly VAT revenues fell up to 30% around the event of largest drop in mobility for each country. We also estimate mobility elasticities of VAT revenue. Mobility-restriction policies rising by 10% were associated with drops in VAT of 1.4%; while a 10% rise in actual mobility decreased VAT revenues by 3%. Furthermore, we show both elasticities were significantly smaller in the last quarter of 2020. Beyond the pandemic, results matter as a benchmark for macroeconomic variables under large disruptions.

Suggested Citation

Rosso, Lucas and Wagner, Rodrigo Andres, How Much Does Mobility Matter for Value-Added Tax Revenue? Cross-Country Evidence around COVID-19 (February 3, 2023). Available at SSRN: https://ssrn.com/abstract=4347331 or http://dx.doi.org/10.2139/ssrn.4347331

Lucas Rosso

University of Chile

Rodrigo Andres Wagner (Contact Author)

UAI Business School

Diagonal Las Torres 2700
Penalolen
Santiago
Chile

HOME PAGE: http://https://sites.google.com/site/rodrigoawagner

Growth Lab - Harvard University (Center for Int. Development) ( email )

79 John F. Kennedy Street
Cambridge, MA MA 02138
United States

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