Varieties of VAT pass through

This paper exploits a unique dataset (monthly observations on consumer prices and VAT rates for around 70 commodity groups in 17 Eurozone countries over 1999-2013) to identify the extent of pass through for several types of VAT change-including (a key concern, previously unaddressed) in the standard VAT rate. The impact on consumer prices proves to vary systematically and sharply across these different types of VAT reform. For example, the usual presumption of full pass through is broadly confirmed for changes in the standard rate, but pass through for reduced rates appears to be generally noticeably lower. The results are robust against endogeneity and attenuation bias.