VAT pass-through: the case of a large and permanent reduction in the market for menstrual hygiene products

Alisa Frey () and Justus Haucap
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Alisa Frey: Heinrich Heine University Düsseldorf

International Tax and Public Finance, 2024, vol. 31, issue 1, No 7, 160-202

Abstract: Abstract This paper examines the price effects of a VAT (value-added tax) reduction for menstrual hygiene products in Germany. Several aspects make this VAT reduction particularly interesting: the reduction is exogenous to economic conditions, the reduction was substantial and permanent, and demand can be assumed to be inelastic. We find that the VAT reduction was completely passed through to consumers. In fact, pass-through rates of significantly more than 100% can be observed. We find that the excess pass-through occurred in relatively competitive market segments, and that it is almost fully explained by retailers rounding down prices after the reduction.

Keywords: VAT; Pass-through; Hygiene products; Retail competition; Gender equality; Rounding effects; Tampon tax (search for similar items in EconPapers)
JEL-codes: H22 H25 H32 K34 L81 (search for similar items in EconPapers)
Date: 2024
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Working Paper: VAT Pass-Through: The Case of a Large and Permanent Reduction in the Market for Menstrual Hygiene Products (2022)
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DOI: 10.1007/s10797-023-09813-w

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