Integrating VAT into EUROMOD

Publication type

Research Paper

Series Number



FLEMOSI Discussion Papers


Publication date

April 15, 2014


This paper documents the integration of microsimulation tools for direct taxation, indirect
taxation, and social benefits in the context of the European tax and benefit simulator,
EUROMOD. Integration has been developed in parallel for two countries: Belgium and
Germany. The paper at hand documents the process and presents simulation results for the
case of Belgium. An integrated database underlying EUROMOD that contains householdlevel
information on income and consumption is generated. Consumption micro data from
the 2009 cross section of the household budget survey for Belgium is used to impute
information on spending for durable and non-durable commodities into EU-SILC data,
applying regression-based imputation techniques. Engel curves are estimated at the
household level for total non-durable spending, expenditures on durable goods, as well as
non-durable expenditure share equations. The imputed household spending is then used to
simulate the baseline VAT system in EUROMOD, for which we report an incidence
analysis. Finally, several arbitrary policy reforms implementing VAT rate uniformity are
analyzed with respect to their distributional impact.



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