A UK study suggests that consumers there did not benefit from repeal of the tampon tax (see here). A new study out of Germany suggests contrary results in that country.
Here is the abstract of VAT Pass-Through: The Case of a Large and Permanent Reduction in the Market for Menstrual Hygiene Products by Alisa Frey and Justus Haucap, both of the Heinrich Heine University Dusseldorf – Department of Economics:
This paper is about the price effects caused by a VAT (value-added tax) reduction for menstrual hygiene products in Germany. Several aspects make this VAT reduction particularly interesting: The exogeneity of the reduction under otherwise constant economic conditions, the reduction was substantial and permanent, demand for the products is inelastic and in many cases, pass-through rates are more than 100 percent. We find that the VAT reduction is completely passed through to consumers. Despite this complete pass-through, we still detect a significant effect of retailer competition: When more retailers offer a product, the price reduction is larger.
The full paper is available here.
