Who Really Benefits from Consumption Tax Cuts? Evidence from a Large VAT Reform in France.
In this paper we evaluate the incidence of a large cut in value-added taxes (VAT) for French sit-down restaurants. In contrast to previous studies that focus on prices only, we estimate its effect on four groups: workers, firm owners, consumers and suppliers of material goods. Using a difference-in-differences strategy on firm-level data we find that: (1) the effect on consumers was limited, (2) employees and sellers of material goods shared 25 and 16 percent of the total benefit, and (3) the reform mostly benefited owners of sit-down restaurants, who pocketed 41 percent of the tax cut.
The views expressed in this paper are the authors’ and should not be interpreted as CBO’s. We are thankful to Alan Auerbach, Hilary Hoynes and Emmanuel Saez for their continuous support and guidance throughout this project. We also thank David Cashin, Tuomas Kosonen, Jonathan Goupille-Lebret, David Seim, David Sraer, Alisa Tazhitdinova and Reed Walker for helpful suggestions and comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Youssef Benzarti & Dorian Carloni, 2019. "Who Really Benefits from Consumption Tax Cuts? Evidence from a Large VAT Reform in France," American Economic Journal: Economic Policy, vol 11(1), pages 38-63. citation courtesy of