Food prices and tax incidence: evidence from Brazilian data

Mauricio Canêdo-Pinheiro, Leonel Cesarino Pessôa, Kalil Said Jabour and William do Val Domingues Junior

EconomiA, 2025, vol. 26, issue 2, 179-192

Abstract: PurposeThe paper estimates the ICMS (a kind of value-added tax at the state level) incidence on a basket of 79 food products from 1994 to 2021 in the Brazilian states of Bahia, Rio de Janeiro, Minas Gerais and São Paulo.Design/methodology/approachWe use panel data estimators to evaluate the pass-through of the ICMS to consumer prices. Given that tax changes potentially influence prices of substitute and complementary products in the same geographic area, our empirical strategy relies on prices of similar products in other states to ensure causal identification.FindingsThe pass-through is neither complete nor immediate for many products, especially industrialized products, confirming the existing evidence for Brazil and other countries. On average, each percentage point of variation of the ICMS generates a cumulative variation of approximately 0.13% in prices. This variation takes 4 months after the change in the tax rate to be fully transmitted to final consumers.Originality/valueMost of the literature focuses on developed countries. We innovate by using a novel database to estimate, with a solid causal identification strategy, the tax incidence for a broad basket of food products in a developing country. We also innovate by implementing a data-driven method for selecting lag length. The results can be helpful in the debate on tax reform underway in Brazil.

Keywords: Taxation; ICMS; Tax incidence; Brazil (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/econ/article/26/2/179/1265 ... idence-evidence-from (text/html)
https://www.emerald.com/econ/article-pdf/26/2/179/ ... n-02-2025-0042en.pdf (application/pdf)

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:eme:econpp:econ-02-2025-0042

DOI: 10.1108/ECON-02-2025-0042

Access Statistics for this article

EconomiA is currently edited by Professor Joaquim Andrade

More articles in EconomiA from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().