IDEAS home Printed from https://ideas.repec.org/a/pfq/journl/v63y2018i3p355-375.html
   My bibliography  Save this article

Does VAT Cut Appear on the Menu? The Consumer Price Impact of Hungarian VAT Decreases of 2016–2017

Author

Listed:
  • Bálint Ván

    () (research specialist, Ministry of Finance, Department of Tax Policy and International Taxation, Research Division)

  • Dániel Oláh

    () (PhD student, University of Pécs)

Abstract

To understand the economic impacts of VAT changes, the passthrough to consumer prices should be analysed. The main objective of the study is to examine passthrough with the rarely used method of synthetic controls for Hungarian VAT changes in 2016–2017. Synthetic price indices are created from the price indices of the same consumer expenditure categories of different European countries. The study finds almost full passthrough in case of pork and chicken, while the passthrough is only partial for fresh milk and eggs. The primarily analysed Hungarian VAT changes of 2016–2017 have not been reflected in the consumer prices of the restaurant sector at all. The price impacts for food items are in line with the experiences of the Romanian decrease of VAT in 2015. Analysing the earlier Hungarian and international passthrough rates of the restaurant sector with the synthetic control method, we can state that this sector is characterized by strong asymmetric passthrough. VAT increases are fully transferred to consumer prices while this is not the case for VAT decreases.

Suggested Citation

  • Bálint Ván & Dániel Oláh, 2018. "Does VAT Cut Appear on the Menu? The Consumer Price Impact of Hungarian VAT Decreases of 2016–2017," Public Finance Quarterly, State Audit Office of Hungary, vol. 63(3), pages 355-375.
  • Handle: RePEc:pfq:journl:v:63:y:2018:i:3:p:355-375
    as

    Download full text from publisher

    File URL: https://www.penzugyiszemle.hu/pfq/upload/pdf/penzugyi_szemle_angol/volume_63_2018_3/A_Van-Olah_2018_3.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    VAT; passthrough; synthetic control; regression;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pfq:journl:v:63:y:2018:i:3:p:355-375. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Pal Peter Kolozsi) The email address of this maintainer does not seem to be valid anymore. Please ask Pal Peter Kolozsi to update the entry or send us the correct email address. General contact details of provider: https://www.asz.hu .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.