Costly, But (Relatively) Ineffective? An Assessment of Germany's Temporary VAT Rate Reduction During the COVID-19 Pandemic
We evaluate Germany’s temporary value-added tax (VAT) rate reduction as a tool to stimulate consumer spending during the Covid-19 pandemic using a comparative case study approach. We construct a credible counterfactual for Germany in a two-step procedure. First, we carry out a careful pre-selection of the donor pool countries to obtain a control group that is highly similar to Germany regarding important post-treatment characteristics. Second, we apply a reweighting scheme on the pre-selected donor countries. The synthetic control group only differs from Germany in the way that it did not implement the temporary VAT rate reduction. Our results indicate that the German VAT cut policy and partial VAT reductions in other countries were relatively ineffective in stimulating consumption with regards to their costs when compared to other measures such as (targeted) direct cash transfers. We attribute this to the fact that direct cash transfers are more comprehensible, salient, and actionable, in particular, in a dynamic environment with high uncertainty induced by unclear future economic prospects
Year of publication: |
[2023]
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Authors: | Baudisch, Victoria ; Neuenkirch, Matthias |
Publisher: |
[S.l.] : SSRN |
Subject: | Deutschland | Germany | Coronavirus | Umsatzsteuer | Sales tax | Epidemie | Epidemic | Wirkungsanalyse | Impact assessment |
Saved in:
freely available
Extent: | 1 Online-Ressource (44 p) |
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Series: | CESifo Working Paper ; No. 10417 |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments 2023 erstellt |
Other identifiers: | 10.2139/ssrn.4449546 [DOI] |
Classification: | E21 - Consumption; Saving ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation ; E65 - Studies of Particular Policy Episodes ; H31 - Household |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014356603