The (Non-)Neutrality of Value-Added Taxation

Georg Schneider, Frank Stähler and Georg U. Thunecke

No 9663, CESifo Working Paper Series from CESifo

Abstract: Border adjustment taxes like the value-added tax (VAT) are commonly regarded to promote efficiency and equity due to their de jure trade neutrality. We analyse the effects of the VAT on trade in final goods in the European Union (EU) from 1988 to 2019. We find that the VAT is de facto non-neutral. A one percentage point VAT increase implies a 5.45% reduction of foreign imports relative to internal trade. These effects are not driven by institutional quality, EU accession, or preferential Common Market access.

Keywords: value-added taxation; trade neutrality; discrimination; border adjustment (search for similar items in EconPapers)
JEL-codes: F10 F14 H24 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-eec, nep-int, nep-pbe and nep-pub
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Working Paper: The (Non-)Neutrality of Value-Added Taxation (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9663

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