Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/308365 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11469
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper studies the effects of transitioning from a system of sales taxes to a value-added tax (VAT) on firm-level outcomes. We construct a dataset of product- and state-specific tax rates before and after India gradually switched from a sales tax to a VAT. Exploiting staggered state-level adoptions, we first show that following the transition, effective tax rates declined substantially and complexity as measured by various proxies generally also fell. We then show that sales increased by 57% in the medium run. The reform resulted in increased earnings for workers and higher amounts of capital and digital accounting.
Subjects: 
value added tax
sales tax
production efficiency
firms
JEL: 
H21
H25
H26
H71
O17
O23
Document Type: 
Working Paper
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