Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324381 
Year of Publication: 
2025
Series/Report no.: 
Cardiff Economics Working Papers No. E2025/4
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
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.
Subjects: 
VAT cut
pass-through
hospitality
JEL: 
H22
H25
L83
Document Type: 
Working Paper

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