Further developments in the decomposition of the Eurostat net tax matrices and their transformation to GTAP format

The paper describes the progress of a research done since its presentation at the 19th Annual GTAP-conference. To supplement the GTAP9 data with detailed information on the taxes and subsidies on products the European Commission’s Joint Research Centre provided the set of the Eurostat Taxes Less Subsidies on Products (TLS) matrices, Supply- Use- and Input-Output tables compiled for 2010. The TLS matrices were decomposed to their VAT, excise tax, custom duty, other taxes on products and subsidy parts. To do this many auxiliary data were acquired and processed. The data sources and the main data problems are duly discussed. Following sections describe the many steps of the decomposition and transformation process including the reclassification of the TLS matrices to product by product break-down, the GTAP sector-profile cleaning of the TLS layers, the decomposition of the reclassified TLS matrices to the mentioned TLS layers by a model, the estimation of the transformation share matrices and their use for producing first estimates of the TLS layers in GTAP sector break-down, and the elaboration of the TLS-layers reconciliation model, which finds such TLS-layers which are 'closest' to these first estimates. The constraints of this model include the add-up consistency criteria for the TLS layers and the aggregate TLS matrix, balance requirements, consistency criteria with other external indirect tax data and other constraints (implicit tax rates, proportions, block-totals, etc.). Then it is shown how the resulting TLS layers are split to imported and domestic commodities related parts. Finally, the numerical results of the model estimates are presented by arguing that despite the many problems the model have produced reasonable results. The generated TLS database and the acquired in-depth knowledge of the country-specific tax mechanisms and accounting practices, may help GTAP-experts, other researchers and others who are involved in tax-, price- and social-policy.