Consumption Taxes and Corporate Income Taxes: Evidence from Place-Based VAT

Faced with a dire situation, in April 2010, Greece became the first country in the EU to seek financial assistance in the form of an economic adjustment programme from other European countries and with the 1For instance, if the VAT rate in the mainland was 21% and the reduced rate (on basic and pharmaceutical products) was 9%, the place-based VAT applicable in the islands was 14% and 6% respective. [...] A single harmonised rate was agreed to align the islands to the mainland’s rate and the repeal of the regime saw the day of light in an omnibus law in August 2015. [...] The solid line represents the 24% VAT rate of the VAT-constant islands, whilst the dashed line shows the change in VAT rate from 16% to 24% for the VAT-increase islands. [...] Crucially, the postcode and address of the firms is not contained in the administrative dataset, which does not allow the identification of the corporations in the islands they operate. [...] 12 The decrease in corporate income taxes is a direct reflection of the decrease in profits since the former is a percentage of the latter.