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

Author/Editor:

Matthieu Bellon ; Alexander Copestake

Publication Date:

March 5, 2021

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Working Paper No. 2021/061

Frequency:

regular

English

Publication Date:

March 5, 2021

ISBN/ISSN:

9781513571546/1018-5941

Stock No:

WPIEA2021061

Format:

Paper

Pages:

56

Please address any questions about this title to publications@imf.org