Tax incidence in a vertical supply chain: Evidence from cigarette wholesale prices

Kyle Rozema*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

I investigate how the burden of consumption taxes not borne by consumers is shared between upstream firms that produce a taxed good and downstream firms that sell the goods. Using novel data on monthly brand-level cigarette wholesale prices and retail prices from Nielsen Homescan data, I find that taxes are passed through to wholesale and retail prices at rates of 0.80 and 0.72. The results suggest that downstream firms selling cigarettes bear no more than one-third of the firm share of the tax burden.

Original languageEnglish (US)
Pages (from-to)427-450
Number of pages24
JournalNational Tax Journal
Volume71
Issue number3
DOIs
StatePublished - Sep 2018

Keywords

  • Consumption taxes
  • Supply chain
  • Tax incidence

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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