The distributional consequences of tax pass-through: The case of Germany's fuel tax discount
Exploiting exogenous variation in retail fuel prices from a temporary fuel tax discount in Germany, we explore the distributional consequences emerging from differential pass-through rates over space and time. We draw on daily gasoline prices of virtually all gas stations in Germany and neighboring France, with France serving as a control site, and estimate an event study model covering the full period of the discount from June to August 2022. We find average pass-through rates on the order of 96 % for diesel and 82 % for petrol, but with substantial variability by regional income and station density. Our results additionally reveal heterogeneity over time: The magnitude of the pass-through rate dissipates sharply for both fuel types over the three months in which the discount was in effect, dropping to 46 % for diesel and 74 % for petrol by the final month, a pattern consistent with retailer responses to short-term changes in consumer attention. Taken together, our results indicate that average pass-through estimates may obscure spatial and temporal heterogeneity that bears upon the assessment of distributional effects: A back-of-the-envelope calculation indicates that 62 % of the discount's financial relief accrues to households with above-median incomes.
Frondel, M., P. Thiel and C. Vance (2026), The distributional consequences of tax pass-through: The case of Germany's fuel tax discount. Regional Science and Urban Economics, 117, 104183