Sales and Price Effects of Pre-announced Consumption Tax reforms: Micro-level Evidence from Europoean VAT

Buettner, Thiess and Madzharova, Boryana (2019) Sales and Price Effects of Pre-announced Consumption Tax reforms: Micro-level Evidence from Europoean VAT. Oxford University Centre for Business Taxation, Oxford.

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Abstract

This paper studies the effects of consumption tax reforms on prices and the time path of consumption spending in EU countries utilizing micro-level data on the monthly unit sales and prices of consumer durables. The identification strategy exploits the trading of identical products in multiple countries. The results show that tax-rate changes are fully and quickly shifted into prices and strongly affect the time path of consumption. The empirical findings for consumption spending indicate that tax rate changes exert temporary effects shortly before implementation, which are more than reverted after implementation. Quantitatively, we find that sales increase by about 2.5% in the last month before and drop by almost 5% after implementation if the tax rate increases by one percentage point.

Item Type: Other Working Paper
Keywords: Oxford University Centre for Business Taxation; tax reform; Fiscal Policy; Consumption tax; Pass-Through; Tax Incidence; Durable Goods
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 09 Sep 2019 08:16
Last Modified: 09 Sep 2019 08:16
Funders: n/a
URI: http://eureka.sbs.ox.ac.uk/id/eprint/7423

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