Template-Type: ReDIF-Article 1.0
Author-Name: Mariia A. Elkina
Author-Email: elkina@nifi.ru
Author-Workplace-Name: Financial Research Institute, Moscow 127006, Russian Federation; National Research University Higher School of Economics, Moscow 101000, Russian Federation
Title: The Impact of Indirect Tax Rates Cut on Inflation: Evidence From Russia
Abstract: The article analyzes the inflationary effect of the value added tax rate cut and abolishment of the sales tax in Russia in 2004. For this purpose, a panel regression with inflation rates of 39 CPI items is estimated for the period from 2000 to 2007. The results indicate that during the period of the indirect tax reform there was a significant divergence between items which experienced a tax rate change and those which did not. This effect starts before the implementation of tax rate changes, lasting for three months and amounting to −0.3 p.p. each month. The overall impact on inflation is estimated at − 0.6–0.7 p.p. in annual terms. Hence, the indirect tax pass-through was far from being full in 2004. Consequently, producers and retailers were the ones who gained the most from the tax rate cut in 2004. Empirical evidence indicates that a cut in indirect tax rates is rather a way to support producers and retailers than a policy which can stimulate consumption.
Classification-JEL: H20, E62
Keywords: pass-though effect, value added tax, sales tax, indirect taxes, inflation, consumer prices, fiscal policy
Journal: Finansovyj žhurnal — Financial Journal
Pages: 37-49
Issue: 5
Year: 2019
Month: October
DOI: 10.31107/2075-1990-2019-5-37-49
File-URL: https://www.finjournal-nifi.ru/images/FILES/Journal/Archive/2019/5/statii/fm_2019_5_03.pdf
File-Format: Application/pdf 
Handle: RePEc:fru:finjrn:190503:p:37-49