How does Simplifying VAT affect Cross-Border Imports? Evidence from Transaction-Level Data

• In Event: Byte Me: Taxing the Digital Frontier

Abstract

Does simplification increase firms' compliance with value-added tax (VAT)? We study the 2021 EU VAT e-commerce reform, which introduced the One Stop Shop (OSS) and Import One Stop Shop (IOSS) to simplify cross-border VAT reporting for business-to-consumer (B2C) sales. Using German administrative data and a combination of difference-in-differences and bunching designs, we assess whether these measures increased reported sales and VAT revenues.
For the IOSS we find that the reform led to a significant increase in low-value B2C imports from non-EU countries below the EUR 150 threshold, suggesting strategic adjustments by firms to benefit from simplified reporting. No similar pattern is observed in B2B transactions. Further analysis of shipment weights reveals that B2C consignments became lighter post-reform, consistent with undervaluation or shipment splitting to avoid VAT complexity and tariffs.

Authors

• Alina Pfrang, Stanford University

• Philipp Doerrenberg, University of Mannheim