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"Can VAT Cuts and Anti-Profiteering Measures Dampen the Effects of Food Price Inflation?"
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Abstract: This paper estimates the effect of a temporary and large (21 p.p.) value-added tax (VAT) cut
and anti-profiteering measures on food necessities during a period of high inflation in Argentina.
Using barcode-level data across more than 3,000 supermarkets, we find that (1) absent the antiprofiteering
measures, the pass-through of the temporary VAT cut to prices was asymmetric
and persistent; (2) imposing anti-profiteering measures led to symmetric pass-through rates.
Using a welfare model, we show that the VAT cut resulted in progressive welfare effects and
that the anti-profiteering measures were successful at dampening the regressive welfare effects
of the asymmetric pass-through. However, we show that these policies benefited high-income
households more.