Seminario IECON: "Can Governments Mandate Tax Incidence? Evidence from a Large VAT Cut in Argentina"

This paper shows that governments can successfully affect the pass through of Value-Added Taxes (VATs) to prices via mandates. To do so, we use high-frequency retail scanner data from Argentina, along with a temporary 21 percentage point VAT cut on essential goods whose pass-through to prices was mandated by the government to be 100% for the VAT cut and no more than 33% for the VAT increase. We implement a difference-in-differences empirical design comparing goods that are subject to the VAT cut and/or to the pass-through mandates to those that are not. We find that, while compliance is not perfect, pass-through is substantially affected---often by a factor of two---by government mandates. Furthermore, and using additional variation, we show that pass-through mandates are four times more effective when prices are monitored by the government. Our findings imply that tax incidence is not an immutable and structural parameter but instead can be affected by governments.

Martes 21/6/2022

12 a 13 hs.