Determinants of VAT pass-through under imperfect competition: Evidence from Japan

Kosuke Shiraishi

Japan and the World Economy, 2022, vol. 61, issue C

Abstract: This study empirically explores value-added tax (VAT) pass-through using unique point-of-sales (POS) data at supermarkets and drugstores in Japan. The VAT increase in 2014 covers almost all goods and services, with the same increase rate of 3%. Conventional wisdom assumes that all goods and services experience a 3% price increase from full-shifting. I show that the price changes in the month the VAT was increased are diversified, that is, the tax incidences are not uniform. The model estimations indicate that market conditions, such as elasticity and market concentration, determine the extent of tax shifting in accordance with theoretical assumptions. The effectiveness of the imperfect market approach is demonstrated. The evidence from this study implies that distributional equity cannot be attained through rate differentiation.

Keywords: Value-added tax; Pass-through; Tax incidence; Market condition; Imperfect competition; Point-of-sales data (search for similar items in EconPapers)
JEL-codes: D22 D43 H22 H24 L11 L13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0922142522000068
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:61:y:2022:i:c:s0922142522000068

DOI: 10.1016/j.japwor.2022.101120

Access Statistics for this article

Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao

More articles in Japan and the World Economy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().