Vat Collection Only at the Retail Stage: Evidence on Tax Compliance

57 Pages Posted: 21 Dec 2023

See all articles by Annalisa Tassi

Annalisa Tassi

Friedrich-Alexander-Universität Erlangen-Nürnberg


I explore the effects of institutional changes in tax collection on VAT remittances at the retail stage, using data on individual firms’ tax files from the universe of German VAT returns. More specifically, I explore if tax evasion increases at the “last mile” due to the implementation of the so-called “reverse charge (RC)” mechanism in Germany. With the implementation of RC, Germany is increasingly removing VAT withholding along the value chain. To identify the effects of RC, I employ an instrumental variable (IV) approach. The IV approach exploits the institutional variation of RC based on the staggered introduction of RC in certain industries. The findings do not indicate that RC leads to greater evasion at the retail stage.

Keywords: Value Added Tax, Reverse Charge, Tax Evasion, Withholding, Last-Mile Problem

Suggested Citation

Tassi, Annalisa, Vat Collection Only at the Retail Stage: Evidence on Tax Compliance. Available at SSRN: or

Annalisa Tassi (Contact Author)

Friedrich-Alexander-Universität Erlangen-Nürnberg ( email )

Lange Gasse 20
Nuremberg, 90403

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