<p>There is no one percentage. It would depend on the dynamics of the market for each particular good. At any given time, there would be an average percentage passed through, but this would probably be very difficult to measure or estimate. Markets with near perfect competition pass 100% of the tax to end-buyers via higher prices (tho the industry as a whole also suffers as <a href="https://governology.substack.com/p/taxes" rel="nofollow noreferrer">the higher price leads to fewer sales</a>). On the more oligopolistic end, the tax is shared more evenly between the sellers and buyers - tho how much is shared would then depend on the elasticity of demand and the dynamics of the oligopolistic market.</p>

CC BY-SA 4.0
2023-07-22T15:35:13.653Z
2023-07-22T15:35:13.653Z
Governology
<p>From what I can find on <a href="https://scholar.google.com" rel="nofollow noreferrer">Google Scholar</a> it looks like there is a pass-through effect of approximately 1/3 the amount of a Value Added Tax - with the exception of food production, which trends higher - going to the consumer. In other words, instituting a VAT results in about 1/3 of that VAT showing up as extra costs to the consumer.</p>

<p>Please assess the accuracy of the above estimate with sources you have found.</p>

<p>Estimation Sources:  </p>

<blockquote>
  <p>"My findings suggest that taxes levied on food are completely shifted to consumer prices, while there is little spill-over effects to most other goods."</p>
</blockquote>

<p><a href="https://academic.oup.com/ej/article-abstract/129/618/853/5289453" rel="nofollow noreferrer">https://academic.oup.com/ej/article-abstract/129/618/853/5289453</a></p>

<blockquote>
  <p>"Since the effect on prices was limited, we conclude that the burden of the VAT tax was indeed shared between producers and consumers."</p>
</blockquote>

<p><em>"<a href="https://books.google.com/books?id=NKZ6DwAAQBAJ&amp;lpg=PA27&amp;ots=efM07LqoVs&amp;dq=VAT%20Since%20the%20effect%20on%20prices%20was%20limited%2C%20we%20conclude%20that%20the%20burden%20of%20the%20VAT%20tax%20was%20indeed%20shared%20between%20producers%20and%20consumers&amp;pg=PA27#v=onepage&amp;q=VAT%20Since%20the%20effect%20on%20prices%20was%20limited,%20we%20conclude%20that%20the%20burden%20of%20the%20VAT%20tax%20was%20indeed%20shared%20between%20producers%20and%20consumers&amp;f=false" rel="nofollow noreferrer">The Price and Welfare Effects of The Value-Added Tax: Evidence from Mexico</a>"</em>, p27: Conclusions</p>

<p>General reading from:<br>
<em>"<a href="https://econpapers.repec.org/paper/cesceswps/_5f5531.htm" rel="nofollow noreferrer">Estimating VAT Pass Through</a>"</em> By Ms. Dora Benedek, Ruud A. de Mooij, Mr. Philippe Wingender</p>

<value><taxation>
What percentage pass-through effect do VAT taxes have?
LabGecko
# What percentage pass-through effect do VAT taxes have?

(Asked by: username_0 on 2019-04-22)

From what I can find on [Google Scholar](https://scholar.google.com) it looks like there is a pass-through effect of approximately 1/3 the amount of a Value Added Tax - with the exception of food production, which trends higher - going to the consumer. In other words, instituting a VAT results in about 1/3 of that VAT showing up as extra costs to the consumer.

Please assess the accuracy of the above estimate with sources you have found.

Estimation Sources:

> "My findings suggest that taxes levied on food are completely shifted to consumer prices, while there is little spill-over effects to most other goods."

<https://academic.oup.com/ej/article-abstract/129/618/853/5289453>

> "Since the effect on prices was limited, we conclude that the burden of the VAT tax was indeed shared between producers and consumers."

*"[The Price and Welfare Effects of The Value-Added Tax: Evidence from Mexico](https://books.google.com/books?id=NKZ6DwAAQBAJ&lpg=PA27&ots=efM07LqoVs&dq=VAT%20Since%20the%20effect%20on%20prices%20was%20limited%2C%20we%20conclude%20that%20the%20burden%20of%20the%20VAT%20tax%20was%20indeed%20shared%20between%20producers%20and%20consumers&pg=PA27#v=onepage&q=VAT%20Since%20the%20effect%20on%20prices%20was%20limited,%20we%20conclude%20that%20the%20burden%20of%20the%20VAT%20tax%20was%20indeed%20shared%20between%20producers%20and%20consumers&f=false)"*, p27: Conclusions

General reading from:  
*"[Estimating VAT Pass Through](https://econpapers.repec.org/paper/cesceswps/_5f5531.htm)"* By Ms. Dora Benedek, Ruud A. de Mooij, Mr. Philippe Wingender

**Tags:** value, taxation


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## 1 answers

### Answer by username_1 on 2023-07-22. Score: 1

There is no one percentage. It would depend on the dynamics of the market for each particular good. At any given time, there would be an average percentage passed through, but this would probably be very difficult to measure or estimate. Markets with near perfect competition pass 100% of the tax to end-buyers via higher prices (tho the industry as a whole also suffers as [the higher price leads to fewer sales](https://governology.substack.com/p/taxes)). On the more oligopolistic end, the tax is shared more evenly between the sellers and buyers - tho how much is shared would then depend on the elasticity of demand and the dynamics of the oligopolistic market.


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