Shifting value added tax on labor – the case of the book market in Central and Eastern European Countries

Abstract

In the literature the question whether a tax burden is shifted on labor doesn’t have a clear answer. Using data which refers to book publishers in the Central and Eastern European Countries I try to answer the question whether employees bear the tax burden of the value added tax imposed on books. I test the hypothesis that the higher the value added tax rate is the lower the costs of employees are. To examine the relation between the value added tax rate and the costs of employees, a regression analysis is used. The models presented in the paper allow us to give the positive answer to the main question. The research supports other authors’ findings that labor, at least partly, bears tax, which is not imposed directly on wages.