Few studies about value added tax (VAT) have examined business-to-business (B2B) transactions, and policymakers implicitly assume that VAT will be full-shifted. This paper investigates theoretically and empirically whether this is true. A system of input tax credit seems to allow firms to avoid the VAT burden. However, the determination of the transaction prices is left to the market, and taxation affects intermediate goods markets. We examine VAT pass-through in B2B transactions using the producer price indices in Japan. The October 2019 VAT increase in Japan covered almost all private goods and services, and prices in B2B transactions were subject to tax increases. We show that, despite the input tax credit, the tax is not fully shifted in B2B transactions. The degree of pass-through is more likely upstream of the transaction stage, whereas the pass-through is more difficult downstream closer to the taxpayer, the consumer.

We estimate the effect of a temporary and large (21 pp) VAT cut along with anti-profiteering measures on food necessities during a period of high inflation in Argentina. Using barcode-level data in over 3,000 supermarkets, we find that (1) absent the anti-profiteering measures, prices responded less to the VAT cut than its repeal resulting in prices that were higher than their pre-VAT cut levels; (2) imposing anti-profiteering measures resulted in symmetric pass-through rates. Using a household welfare model, we show that the VAT cut resulted in progressive welfare effects and that the anti-profiteering measures were successful at dampening the regressive welfare effects of the asymmetric pass-through. However, we show that these policies benefitted high-income households more because pass-through rates are more asymmetric in independent supermarkets, which is precisely where low-income households tend to shop the most.

We study the equity-efficiency trade-off of differentiated commodity taxation. When first introduced in 2017, India's General Sales Tax (GST) applied the highest tax rate of 28\% to many normal and luxury goods which were later reclassified to the 18\% tax bracket. We combine the sharp cuts in tax rates with administrative data at the firm-goods-month level, to estimate behavioral responses in a difference in difference design across goods. The 10p.p. tax cut led to a 5p.p. rise in sales and was mostly passed-through to consumers via lower prices. The sales of substitute goods hardly changed, even for multi-product firms selling both a treated good and a close substitute, suggesting a low re-labelling elasticity. These results challenge the common view that indirect commodity taxation is of limited use for redistribution: in countries where direct taxation is constrained, taxing luxury goods at higher rates might be desirable to achieve distributional goals while generating limited distortions.

The problem of tax incidence is of great importance for both the theory of taxation and the practice of shaping the relationship between taxpayers and the tax administration. Determining the extent of tax pass-through is important, for example, in the case of overstated or overpaid tax. In some countries, a prerequisite for refunding overpaid tax is to establish that the taxpayer has suffered a loss or damage from the undue tax and has not shifted the tax burden to its customers. The prevention of unjust enrichment of taxpayers follows directly from laws i.a. in Austria, France and the UK. The purpose of the article is to discuss how to understand tax pass-through and a loss or damage resulted from the payment of an undue tax and to determine how to calculate them so that the refund of overpaid tax to the taxpayer does not lead to unjust enrichment.