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EUROMOD extension to indirect taxation

Background

The area of indirect taxes is identified by the European Commission as an important domain for tax policy reforms with potentially wide-ranging socioeconomic effects. There is a renewed interest for tax shifts that reduce labour taxes and increase taxes on commodities, keeping the overall government revenue fixed. While often desirable from an economic or fiscal perspective, these shifts might entail substantial distributional changes. Microsimulation models are particularly suited to investigate how fiscal policy reforms affect different income groups or subgroups of the population.

Project outputs

The project delivered an Indirect Tax Tool (ITT) plug-in for EUROMOD that allows the analyst to perform static microsimulation analyses for 10 EU countries in a comparable way on a single platform. The tool allows the evaluation of both the budgetary effects and the equity impact of (simultaneous) reforms to direct and indirect tax policies and to the social benefit system. In order for the tool to work, for the 10 countries covered, consumption expenditures from national Household Budget Survey (HBS) data were used to inform the imputation of expenditure into the existing EUROMOD input data based on the Survey of Income and Living Conditions (SILC). Engel curves were estimated on the aggregated HBS data and the resulting parameter estimates are then used by the ITT in the imputation of expenditures to the EUROMOD input data. Alongside this imputation, indirect tax policy rules were coded in the country models allowing the tool to produce baseline results for all countries.

The project was conducted jointly by the Katholieke Universiteit Leuven and ISER. It was led and coordinated by ISER.

See the project final report for further details.

Annexes to the final report:

Indirect Tax Tool user manual

BE country report

CZ country report

EE country report

EL country report

LV country report

AT country report

PL country report

RO country report

FI country report

UK country report

Team members

Professor Holly Sutherland

Director of EUROMOD, Research Professor - ISER, University of Essex


Dr Alari Paulus

Research Fellow - ISER, University of Essex


Dr Paola De Agostini

Senior Research Officer - ISER, University of Essex


Dr Chrysa Leventi

Senior Research Officer - ISER, University of Essex


Mr Kostas Manios

EUROMOD Software Developer - ISER, University of Essex


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