Public Finance in the Era of the COVID-19 Crisis
18-20 August 2021 | Online, Organized by University of Iceland, Reykjavík
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Please note that all times are shown in the time zone of the conference. The current conference time is: 5th Dec 2021, 06:38:56pm GMT
K05: Tax Incidence
12:30pm - 12:52pm
The Pass-Through of Temporary VAT Rate Cuts in German Supermarket Retail
1ifo Institute, Germany; 2CESifo
On 1 July 2020, value added tax (VAT) rates were reduced in Germany to fight the economic consequences of the Corona pandemic. The VAT rate reduction is temporary, and rates will go up to their previous level on 1 January 2021. We study the price effects of the temporary VAT rate reduction in German supermarket retail using an extensive webscrapped data set covering the daily prices of roughly 190,000 products. To identify the causal price effects, we compare the development of prices in Germany to those in Austria.Our findings indicate a nearly full pass-through of the VAT rate reduction on prices. On average, prices in German supermarket retail decreased by 2% after the implementation of the VAT rate reduction. We also provide evidence that prices in more competitive product markets decreased to a larger extent.
12:52pm - 1:15pm
Does VAT Remittance Invariance Hold? Evidence From E-Commerce
University of Salento, Italy
This paper provides new evidence on the effect of tax remittance on tax incidence. We test whether the repeal of the reverse charge mechanism for a sample of items sold through Amazon.it has had any impact on their prices. The empirical analysis is performed using the Bayesian Structural time series method, as suggested by Brodersen et al. (2015) and extended by Schmitt et al. (2018). The causal impact of the policy change for each item in the dataset is computed by taking the difference between the treated series (observed) and the predicted counterfactual, which is the outcome that would have occurred had no intervention taken place. Finally, we infer the average effect of the repeal of the reverse charge using a fixed-effects meta-regression approach. The preliminary results shows that in the post-intervention period the prices applied by Amazon.it significantly increase.
1:15pm - 1:37pm
Getting into the Weeds of Tax Invariance
1University of Kentucky, United States of America; 2University of Oregon, United States of America
We provide the first general empirical test of tax invariance (TIV). When a 25 percent tax remitted by manufacturers was eliminated in Washington state and the retail cannabis excise tax was simultaneously increased from 25 to 37 percent---a shift intended to be revenue-neutral---TIV did not hold. Manufacturers kept two-thirds of their tax savings instead of passing all their savings through to retail firms via lower prices as predicted by TIV. One-third of the retail tax increase was passed on to consumers via higher retail prices -- TIV would have predicted constant or even declining tax-inclusive retail prices.
1:37pm - 2:00pm
The Welfare Effects of Property Taxation
1ZEW and Uni Mannheim, Germany; 2Maastricht University
We analyze the welfare implications of property taxation. Using a sufficient statistics approach, we show that welfare effects depend on a few estimable elasticities: the response of housing prices, labor and other types of incomes as well as public goods to property tax rates. Empirically, we exploit the unique institutional setting of municipal property taxation in Germany with and around 15,000~tax reforms in the years between 2000--2017. Our results shows that higher taxes are fully pass-though to rental prices after three years. The price pass-through is somewhat lower in municipalities with inelastic housing supply. Using these reduced form estimates and our theoretical framework, we simulate the welfare effects of property taxes and show that they are highly regressive with the tax burden decreasing in income.
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