MACROECONOMIC EFFECTS OF A VAT REDUCTION IN THE ITALIAN HOTELS & RESTAURANTS INDUSTRY

Mara Manente and Michele Zanette

Economic Systems Research, 2010, vol. 22, issue 4, 407-425

Abstract: The paper tests the effects on the Italian economy of a fiscal measure aimed at lowering the VAT rate from 10% to 5% in the Italian 'Hotels and Restaurants' sector. The analysis focuses first on the impacts in terms of tourism consumption, investments of the sector and public budget. Thereafter, by means of a multiregional-multisectoral input-output model, the increase on the total employment levels by sector and by region has been estimated. Based on a tourism demand elasticity of -1.06 and a supply elasticity of 2.0, tourist nights would increase by a maximum of 3.15% and total tourism consumption by 4.4%, while gross fixed investments by the sector would increase by 2.17%. As for the budget constraint, we have calculated the final 'cost' of the fiscal measure for the Treasury. Concerning the macroeconomic effects in terms of employment, the fiscal measure would produce a total increase of almost 100,000 jobs (expressed in fulltime equivalents).

Keywords: Tourism policy; Tax policy; Value Added Tax; Input-output model (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (10)

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DOI: 10.1080/09535314.2010.526927

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