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The tax shift from labor to consumption in Italy: a fiscal microsimulation analysis using EUROMOD

Author

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  • Andrea Taddei

    () (University of Genoa, Italy)

Abstract

The aim of this paper is to simulate a tax shift reform from labor to consumption in Italy and observe the distributional impact of this policy on households. The microsimulation model used is EUROMOD, which is uniquely focused on direct taxes, social contributions and benefits. Through a two steps matching between the Italian income survey (IT-SILC) and the Households Budget Survey (Indagine sui consumi delle famiglie italiane – ISTAT), the model was enriched with data on consumption and it has been possible to simulate also indirect taxes (VAT and excises). Once calculated the baseline, the reform has been simulated by a decrease in social security contributions paid by employees, compensated with a rise in standard VAT in order to obtain Government budget neutrality. The main finding is that the simulated reform increase the regressive of the system without changes in the redistribution strategies or with a more progressive income taxation. To obtain a measure of the change in households wealth, has been used the Welfare Gain index which considered both consumption and income changes. The results are also shown at regional level.

Suggested Citation

  • Andrea Taddei, 2012. "The tax shift from labor to consumption in Italy: a fiscal microsimulation analysis using EUROMOD," DEP - series of economic working papers 9/2012, University of Genoa, Research Doctorate in Public Economics.
  • Handle: RePEc:gea:wpaper:9/2012
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    File URL: http://www.dep.unige.it/RePEc/gea/wpaper/dwpo-9-dec2012.pdf
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    References listed on IDEAS

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    1. Günter Coenen & Peter McAdam, 2006. "How do VAT changes affect the economy? An illustration using the new area-wide model," Research Bulletin, European Central Bank, vol. 4, pages 2-5.
    2. André Decoster & Jason Loughrey & Cathal O'Donoghue & Dirk Verwerft, 2011. "Microsimulation of indirect taxes," International Journal of Microsimulation, International Microsimulation Association, vol. 4(2), pages 41-56.
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    1. repec:ijm:journl:v10:y:2017:i:1:p:5-38 is not listed on IDEAS

    More about this item

    Keywords

    direct and indirect taxation; fiscal microsimulation; progressivity; tax reform; redistribution;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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