Estimating price pass-through from changes in VAT: A case study on the tampon tax in Italy

In Italy, menstrual hygiene products were classified as non-essential until 2020 and subjected to the full tax rate. Subsequent VAT reforms gradually reduced taxation, but the latest change increased VAT from 5% to 10%, citing the inefficacy of the previous cut. This study examines the impact of these tax changes on prices using a difference-in-difference approach, analyzing four years of consumer panel data on purchases. Control units include periods with standard VAT rates and similar products with unchanged taxation. Findings and policy implications are discussed.