Are Excise Taxes on Beverages Fully Passed through to Prices? The Danish Evidence

U. Michael Bergman, Niels Lynggård Hansen*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

This paper studies tax shifting of excise taxes on alcoholic and nonalcoholic beverages in Denmark. We use a unique data set collected by Statistics Denmark focusing on six episodes of tax changes: three tax cuts and three tax hikes. We find that excise taxes on beer and soda are overshifted but those on liquor are undershifted. We also find that the pass-through is inversely related to the size of the tax change and that there are asymmetric effects of tax changes on soda. Finally, the tax pass-through on beer and soda is an increasing function of the distance to the German border.
Original languageEnglish
JournalFinanzarchiv
Volume75
Issue number4
Pages (from-to)323-356
Number of pages34
ISSN0015-2218
DOIs
Publication statusPublished - 2019

Keywords

  • Alcoholic beverages
  • Excise tax
  • Nonalcoholic beverages
  • Tax incidence

Cite this

Bergman, U. Michael ; Hansen, Niels Lynggård. / Are Excise Taxes on Beverages Fully Passed through to Prices? The Danish Evidence. In: Finanzarchiv. 2019 ; Vol. 75, No. 4. pp. 323-356.
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Are Excise Taxes on Beverages Fully Passed through to Prices? The Danish Evidence. / Bergman, U. Michael; Hansen, Niels Lynggård.

In: Finanzarchiv, Vol. 75, No. 4, 2019, p. 323-356.

Research output: Contribution to journalJournal articleResearchpeer-review

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N2 - This paper studies tax shifting of excise taxes on alcoholic and nonalcoholic beverages in Denmark. We use a unique data set collected by Statistics Denmark focusing on six episodes of tax changes: three tax cuts and three tax hikes. We find that excise taxes on beer and soda are overshifted but those on liquor are undershifted. We also find that the pass-through is inversely related to the size of the tax change and that there are asymmetric effects of tax changes on soda. Finally, the tax pass-through on beer and soda is an increasing function of the distance to the German border.

AB - This paper studies tax shifting of excise taxes on alcoholic and nonalcoholic beverages in Denmark. We use a unique data set collected by Statistics Denmark focusing on six episodes of tax changes: three tax cuts and three tax hikes. We find that excise taxes on beer and soda are overshifted but those on liquor are undershifted. We also find that the pass-through is inversely related to the size of the tax change and that there are asymmetric effects of tax changes on soda. Finally, the tax pass-through on beer and soda is an increasing function of the distance to the German border.

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KW - Tax incidence

KW - Alcoholic beverages

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KW - Nonalcoholic beverages

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