Code for Do Value-Added Taxes Affect International Trade Flows? Evidence from 30 Years of Tax Reforms

This paper uses all Value-Added Tax (VAT) changes across all 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, in spite of some of the VAT changes being substantial. 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.