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Do Value-Added Taxes Affect International Trade Flows? Evidence from 30 Years of Tax Reforms

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  • Youssef Benzarti
  • Alisa Tazhitdinova

Abstract

This paper uses all Value Added Tax (VAT) changes across all EU Member States from 1988 to 2016 to estimate the effect of VATs on trade flows. We find small elasticities of trade flows with respect to VATs, in spite of some of the VAT changes being substantial. We estimate substantially smaller responses of trade flows to VATs compared to the responses of trade flows to tariffs estimated in the trade literature. This finding holds across different time periods, countries and types of reforms. Our results imply that VATs are unlikely to distort trade flows.

Suggested Citation

  • Youssef Benzarti & Alisa Tazhitdinova, 2019. "Do Value-Added Taxes Affect International Trade Flows? Evidence from 30 Years of Tax Reforms," NBER Working Papers 26195, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26195
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    Cited by:

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    2. Asatryan, Zareh & Gomtsyan, David, 2020. "The incidence of VAT evasion," ZEW Discussion Papers 20-027, ZEW - Leibniz Centre for European Economic Research.
    3. Evers, Andrea & Matthaei, Eva Kristina, 2021. "Steuerplanung unter Unsicherheit: Eine Befragungsstudie zum Brexit," Discussion Papers 2021/10, Free University Berlin, School of Business & Economics.
    4. Yoto V. Yotov, 2022. "Gravity at Sixty: The Workhorse Model of Trade," CESifo Working Paper Series 9584, CESifo.
    5. M. Martin Boyer & Philippe d'Astous, 2023. "Tax compliance and firm response to electronic sales monitoring," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1430-1468, November.
    6. Georg Schneider & Frank Stähler & Georg U. Thunecke, 2022. "The (Non-)Neutrality of Value-Added Taxation," CESifo Working Paper Series 9663, CESifo.
    7. Gale, William G., 2020. "Raising Revenue with a Progressive Value-Added Tax," MPRA Paper 99197, University Library of Munich, Germany.
    8. Joel Slemrod & Tejaswi Velayudhan, 2022. "The VAT at 100: A Retrospective Survey and Agenda for Future Research," Public Finance Review, , vol. 50(1), pages 4-32, January.
    9. Fan, Haichao & Liu, Yu & Qiu, Larry D. & Zhao, Xiaoxue, 2020. "Export to elude," Journal of International Economics, Elsevier, vol. 127(C).

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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