Working Paper: CEPR ID: DP15189
Authors: Felix Montag; Alina Sagimuldina; Monika Schnitzer
Abstract: This paper provides the first estimates of the pass-through rate of the ongoingtemporary value-added tax (VAT) reduction, which is part of the German fiscalresponse to COVID-19. Using a unique dataset containing the universe of pricechanges at fuel stations in Germany and France in June and July 2020, we employa difference-in-differences strategy and find that pass-through is fast and substantialbut remains incomplete for all fuel types. Furthermore, we find a high degree ofheterogeneity between the pass-through estimates for different fuel types. Ourresults are consistent with the interpretation that pass-through rates are higher forcustomer groups who are more likely to exert competitive pressure by shopping forlower prices. Our results have important implications for the effectiveness of thestimulus measure and the cost-effective design of unconventional fiscal policy.
Keywords: passthrough; value-added taxes; stimulus; covid-19
JEL Codes: H22; H32; E62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| VAT reduction (H25) | fuel prices in Germany (Q31) |
| VAT reduction (H25) | retail margins (L81) |
| fuel prices in Germany (Q31) | consumption (E21) |
| competitive pressure (L11) | passthrough rates (G19) |
| passthrough rates (G19) | retail margins (L81) |