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Macroeconomic Effects Of A Vat Reduction In The Italian Hotels & Restaurants Industry

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  • Mara Manente
  • Michele Zanette

Abstract

The paper tests the effects on the Italian economy of a fiscal measure aimed at lowering the VAT rate from 10% to 5% in the Italian 'Hotels and Restaurants' sector. The analysis focuses first on the impacts in terms of tourism consumption, investments of the sector and public budget. Thereafter, by means of a multiregional-multisectoral input-output model, the increase on the total employment levels by sector and by region has been estimated. Based on a tourism demand elasticity of -1.06 and a supply elasticity of 2.0, tourist nights would increase by a maximum of 3.15% and total tourism consumption by 4.4%, while gross fixed investments by the sector would increase by 2.17%. As for the budget constraint, we have calculated the final 'cost' of the fiscal measure for the Treasury. Concerning the macroeconomic effects in terms of employment, the fiscal measure would produce a total increase of almost 100,000 jobs (expressed in fulltime equivalents).

Suggested Citation

  • Mara Manente & Michele Zanette, 2010. "Macroeconomic Effects Of A Vat Reduction In The Italian Hotels & Restaurants Industry," Economic Systems Research, Taylor & Francis Journals, vol. 22(4), pages 407-425.
  • Handle: RePEc:taf:ecsysr:v:22:y:2010:i:4:p:407-425
    DOI: 10.1080/09535314.2010.526927
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    Cited by:

    1. Gerum Alexander, 2014. "Untersuchung der Auswirkungen des ermäßigten Mehrwertsteuersatzes auf den Investitionsstau im bayerischen Beherbergungswesen," Zeitschrift für Tourismuswissenschaft, De Gruyter, vol. 6(1), pages 83-90, May.
    2. Rakela Thano, 2013. "Touristic Investments in Saranda Region," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(2), pages 1-9, April.

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