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Impact of VAT Reform on Swedish Restaurants: A Synthetic Control Group Approach

Björn Falkenhall, Jonas Månsson and Sofia Tano

Scandinavian Journal of Economics, 2020, vol. 122, issue 2, 824-850

Abstract: In this paper, we investigate the impact on firms of the value added tax (VAT) reform that took effect in Sweden on 1 January 2012 for restaurant and catering services. Unlike previous research, we use a synthetic control group approach to construct our counterfactual. Our analysis shows that the VAT reduction had a positive effect on turnover, total wages, employment, profit margins, and net entry of firms. The effects of the reform tend to decrease over time. In all, the results point to an overall better performance for the restaurant industry compared with what it would have been in absence of the reform.

Date: 2020
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