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Who Really Benefits from Consumption Tax Cuts? Evidence from a Large VAT Reform in France

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  • Youssef Benzarti
  • Dorian Carloni

Abstract

This paper evaluates the incidence of a large cut in value-added taxes (VATs) for French sit-down restaurants in 2009. In contrast to previous studies, which only focus on the price effects of VAT reforms, we estimate the effects of the VAT cut on four groups: workers, firm owners, consumers, and suppliers of material goods. Using a difference-in-differences strategy on firm-level data, we find that: firm owners pocketed more than 55 percent of the VAT cut; consumers, sellers of material goods, and employees shared the remaining windfall with consumers benefiting the least; and the employment effects were limited.

Suggested Citation

  • Youssef Benzarti & Dorian Carloni, 2019. "Who Really Benefits from Consumption Tax Cuts? Evidence from a Large VAT Reform in France," American Economic Journal: Economic Policy, American Economic Association, vol. 11(1), pages 38-63, February.
    • Handle: RePEc:aea:aejpol:v:11:y:2019:i:1:p:38-63
    Note: DOI: 10.1257/pol.20170504
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    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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