https://youtu.be/EGpB82lPiJQ
The Dr. Néstor Gandelman, associate dean for research at the Universidad ORT Uruguay, explained the results of this study. The article was co-authored by Santiago Acerenza—a researcher at ORT—, Bruno Engel—an upper-level student in the Bachelor’s program in Economics at ORT—and Leandro Zipitría—from the University of the Republic.
“In the Bachelor’s program in Economics, from the very first courses, we ask ourselves what the effects of taxes are. From an accounting or legal standpoint, it’s easy to identify who the withholding agent is or who the legislator thought should pay the tax. In economics, we go a step further. Perhaps what the withholding agent or the legislator thought isn’t what actually happens,” Gandelman noted.
What Happened to the Price of Barbecue After VAT Was Eliminated
Determining who actually pays a tax does not depend solely on what is established by law. From an economic perspective, the burden can be distributed among consumers and sellers according to market forces.
“Studying the effects of taxes is difficult because there are usually no natural settings in which to study these changes,” said the associate dean for research.
This issue was analyzed in light of an exceptional measure implemented in Uruguay. When Russia’s invasion of Ukraine began, certain prices in the food basket were adjusted. In this context, the government temporarily exempted the following from VAT: roast while other cuts of meat remained subject to their usual tax regime.
A 60-day exemption that allowed for price comparisons
The measure lasted for 60 days for the 13- and 15-rib cuts of barbecue.
“The key point to understand here is that only the asado cut was exempt from VAT, and all other cuts of meat were not exempt.”
For Gandelman, this unique feature created a particularly useful scenario: the asado served as the treated group, while other cuts served as the control group. The study primarily used the rump cap to make the comparison and also considered other cuts in robustness tests.
The analysis used price and quantity data for the following periods: before, during, and after the tax exemption. This allowed the researchers to examine whether the drop in the price of asado was indeed a result of the tax elimination or whether it was part of broader trends in the meat market linked to other supply-and-demand factors.
The price cut reached consumers
Based on data from the National Meat Institute (INAC), the project tracked prices at different stages of the supply chain: from the meat-processing plant to the distributor, from the distributor to the wholesaler, and finally from the wholesaler to the consumer. The results showed that the tax reduction was almost entirely passed on throughout the barbecue supply chain.
Specifically, the study estimated a transfer of between 80% and 98% to consumers. It also identified significant changes in the quantities traded at certain stages of the supply chain during the exemption period.
Once the measure ended, prices returned to the levels they would have been at previously, indicating that the effect of the policy was temporary and was concentrated within the 60 days it was in effect.
What did the study conclude?
The results for Uruguay also did not show the so-called hysteresis—a phenomenon whereby the effects on prices persist even after a tax change has been reversed.
According to the evidence presented, the responses to the tax cut and the subsequent tax increase were symmetrical and nearly complete: once the VAT was reinstated, the effect caused by the exemption disappeared, and prices returned to their previous trajectory.