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The Value Added Tax Incidence – the Case of the Book Market in CEE Countries

Arkadiusz Bernal ()
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Arkadiusz Bernal: Poznan University of Economics and Business, Poland

Czech Journal of Economics and Finance (Finance a uver), 2018, vol. 68, issue 2, 144-164

Abstract: Conducting effective economic policy requires understanding of how taxes are shifted. The value added tax rates on books in the Czech Republic, Hungary, Poland and Slovakia in 2003 – 2012 differed much and changed several times, hence it was a good case for exploring the tax incidence. The main objective of the article is to answer the question to whom (consumers, capital, labour) and to what extent the burden of the value added tax on books was shifted. Although the tax is often classified as a consumption tax, the tax on books wasn’t shifted to consumers at least within five months after a tax rate change. The research suggests that the tax is shifted to capital and labour. According to the econometric models, an increase of the value added tax rate on books of 1 percentage point leads to a decrease of the return on equity of book publishers between 0,43 and 0,76 percentage point. It suggests that the value added tax on books was partly shifted to capital. Although wages are rigid, employees bear, to some extent, the burden of the value added tax. The regressions allow concluding that an increase of the value added tax rate of 1 percentage point leads to a reduction in the average wage in book publisher companies in the range 0,84% - 0,92%.

Keywords: tax incidence; value added tax; book market (search for similar items in EconPapers)
JEL-codes: H22 H31 H32 J31 (search for similar items in EconPapers)
Date: 2018
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