VAT cuts as emergency policy intervention: Evidence from the UK case.

Onnis, Luisanna, Piga, Claudio A., Conti, Maurizio and Botasso, Anna 2025. VAT cuts as emergency policy intervention: Evidence from the UK case. [Working Paper]. Working Paper No. E2025/4, Cardiff: Cardiff Economics Working Papers.

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Abstract

In July 2020, the UK government reduced the VAT rate on hospitality services from 20% to 5% as an emergency policy intervention. Using a novel dataset of detailed hotel room characteristics in UK and elsewhere, we estimate how much the tax cut was passed on to consumers via a price reduction. We find a statistically significant contemporaneous pass-through to hotel room prices that varies between around 20% and 50%, with a peak effect on prices observed on the second week after the reform. However, the pass-through effect is the outcome of a discretionary approach as discounts were negligible for rooms sold two months after the policy introduction.

Item Type:	Monograph (Working Paper)
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Subjects:	H Social Sciences > HJ Public Finance
Publisher:	Cardiff Economics Working Papers
Last Modified:	20 Mar 2025 15:31
URI:	https://orca.cardiff.ac.uk/id/eprint/176857

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