Do Value-Added Taxes Affect International Trade Flows? Evidence from 30 Years of Tax Reforms
- American Economic Journal: Economic Policy (Forthcoming)
This paper uses all Value-Added Tax (VAT) changes across EU
Member States from 1988 to 2016 to estimate the effect of VATs on
trade flows. We find small elasticities of trade flows with respect
to VATs, even when VAT changes are large. These elasticities
are substantially smaller than the elasticities of trade flows with
respect to tariffs estimated in the trade literature. This finding
holds across different time periods, countries and types of reforms.
Our results imply that VATs are unlikely to distort trade flows.
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