The full, persistent, and symmetric pass-through of a temporary VAT cut

Tiago Bernardino, Ricardo Duque Gabriel, João Quelhas and Márcia Silva-Pereira

Journal of Public Economics, 2025, vol. 248, issue C

Abstract: We investigate the pass-through of a temporary value-added tax (VAT) cut on selected food products to consumer prices in Portugal. Exploiting a novel data set of daily online prices, we find that the VAT cut was fully transmitted to consumer prices, persisted throughout the policy duration, and prices returned to the pre-implementation trend after reversal. We discuss two potential mechanisms driving this result: the policy’s salience to consumers in a high-inflation environment and the decline in producer prices when implemented. We estimate that the policy reduced the inflation rate by 0.68 percentage points on impact.

Keywords: Value-added tax; Pass-through; Microdata; Public policy; Inflation (search for similar items in EconPapers)
JEL-codes: E31 H20 H22 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272725001148
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:pubeco:v:248:y:2025:i:c:s0047272725001148

DOI: 10.1016/j.jpubeco.2025.105416

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().