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Who Carries the Burden of the Value-Added Tax? Evidence from Germany

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  • Samina Sultan

Abstract

The value-added tax is one of the most important tax revenue sources in many countries. However, it is sometimes considered unfair as it ultimately hits consumption, and poorer households spend a greater share of their income on consumption. But this depends on whether, and to what degree, the value-added tax is actually passed on to consumers. Exploiting an exogenous value-added tax reform in Germany, I use an event study and a differences-in-differences approach to investigate the pass-through to consumers for a wide range of commodities. On average, I find a modestly positive but statistically insignificant effect on prices. However, there are differences in tax incidence between commodity groups and anticipatory price effects well in advance of the actual implementation of the value-added tax reform.

Suggested Citation

  • Samina Sultan, 2020. "Who Carries the Burden of the Value-Added Tax? Evidence from Germany," CESifo Working Paper Series 8803, CESifo.
    • Handle: RePEc:ces:ceswps:_8803
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    consumer price index; value-added tax; tax incidence; fiscal policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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