Analysing the VAT Cut Pass-Through in Spain Using Web Scraped Supermarket Data and Machine Learning

Nicol s Forteza, Elvira Prades and Marc Roca

Working papers from Banque de France

Abstract: On 28 December 2022, the Spanish government announced a temporary value added tax (VAT) rate reduction for selected products. VAT rates were cut on January 1, 2023 and are expected to go back to their previous level by mid-2024. Using a web-scraped data set, we leverage machine-learning techniques to classify each product according to categories of the official classification by the statistical office (COICOP5). Then we study the price effects of the temporary VAT rate reduction covering the daily prices of roughly 10,000 food products sold on-line by a Spanish supermarket. To identify causal effects, we compare the evolution of prices for treated items (that is, subject to the tax policy) against a control group (food items out of the policy's scope). Our findings indicate that, at the supermarket level, the pass-through was almost complete. We observe differences in the speed of pass-through across different product types.

Keywords: Price Rigidity; Inflation; Consumer Prices; Heterogeneity; Microdata; VAT Pass-Through (search for similar items in EconPapers)
JEL-codes: E31 H22 H25 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2024
New Economics Papers: this item is included in nep-big, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:951

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