The Role of Market Structure and Timing in Determining VAT Pass-Through

March 5, 2021

Preview Citation

Format: Chicago

Matthieu Bellon, and Alexander Copestake. The Role of Market Structure and Timing in Determining VAT Pass-Through, (USA: International Monetary Fund, 2021) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We examine the role of market characteristics and timing in explaining observed heterogeneity in VAT pass-through. We first extend existing theory to characterize the roles of imperfect competition and product differentiation, then investigate these relationships empirically using a panel of 14 Eurozone countries between 1999 and 2013. We find important roles for product market regulation and product quality, and little impact of advance announcement of reforms. Our findings have important implications for policy-makers considering VAT rate adjustments, by illuminating which of the consumers or the producers would experience the brunt of a reform across different settings.

Subject: Commodity markets, Competition, Consumer prices, Consumption, Economic sectors, Financial crises, Financial markets, National accounts, Prices, Taxes, Value-added tax

Keywords: Baseline pass-through, Commodity markets, Competition, Consumer prices, Consumption, Elasticity coefficient, Europe, Imperfect competition, Pass through, Pass-through adjustment, Pass-through effect, Pass-through heterogeneity, Price effect, Product Differentiation, Value added tax, Value-added tax, VAT pass-through

Publication Details

Pages:

56
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/061
Stock No:

WPIEA2021061
ISBN:

9781513571546
ISSN:

1018-5941

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