JRC Working Papers on Taxation and Structural Reforms No 06/2026
This paper assesses the fiscal costs and redistributive effects of reduced VAT rates across product categories in the EU. The analysis reveals that reduced rates on essential goods, such as food and beverages, housing, water and electricity, and health-related products are the most cost-effective in achieving redistribution. Others, such as restaurants and accommodation, offer limited redistributive returns at best, while being fiscally costly. The findings show a degree of cross-country heterogeneity caused by different spending patterns across countries. Certain groups, in particular pension-age, female-headed, and rural households, benefit disproportionately from reduced VAT rates due to their consumption patterns. Overall, the findings suggest that better targeting of reduced VAT rates could enhance both their equity and fiscal revenues.
RICCI Mattia;
KISS Áron;
VAN HERCK Kristine;
2026-06-23
European Commission
JRC144844
https://publications.jrc.ec.europa.eu/repository/handle/JRC144844,
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