Working Paper: NBER ID: w26195
Authors: Youssef Benzarti; Alisa Tazhitdinova
Abstract: This paper uses all Value Added Tax (VAT) changes across all EU Member States from 1988 to 2016 to estimate the effect of VATs on trade flows. We find small elasticities of trade flows with respect to VATs, in spite of some of the VAT changes being substantial. We estimate substantially smaller responses of trade flows to VATs compared to the responses of trade flows to tariffs estimated in the trade literature. This finding holds across different time periods, countries and types of reforms. Our results imply that VATs are unlikely to distort trade flows.
Keywords: Value-Added Tax; International Trade; Trade Flows; Tax Reform
JEL Codes: F1; F14; H2; H25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| VAT rate changes (H25) | trade flows (F10) |
| VAT rate changes (H25) | imports (F14) |
| VAT rate changes (H25) | exports (F10) |
| VAT rate changes (H25) | trade flows in tons (F10) |
| VAT rate changes (H25) | imports in tons (F10) |
| VAT rate changes (H25) | exports in tons (F10) |