The Value Added Tax Simulation Model: VATSIM-DF (II)

Cristina Cirillo, Lucia Imperioli and Marco Manzo
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Cristina Cirillo: Ministry of Economy and Finance
Lucia Imperioli: Ministry of Economy and Finance
Marco Manzo: Ministry of Economy and Finance

Working Papers from Ministry of Economy and Finance, Department of Finance

Abstract: This paper describes the VATSIM-DF (II), a non-behavioural microsimulation model on the Value Added Tax (VAT), recently developed to support policy makers in designing VAT related policies in Italy. The most important goals of VATSIM-DF (II) are to estimate actual and expected VAT revenues, assess the VAT incidence on household disposable income, and simulate the distributional effects of changes in fiscal policies. Our results for 2019, at current VAT legislation, confirm the regressivity of VAT with respect to household income. Compared to existing models, the VATSIM-DF (II) has the great advantage of using Tax Register and National Accounts data, which make our model ideal for microsimulation purposes and perfectly consistent with the most updated macroeconomic data. To develop VATSIM-DF (II), we produce an original dataset by merging different data sources. Results for 2019, at current VAT legislation, show the VAT burden on Italian households and confirm the regressivity of VAT. Finally, we test the distributional effect of a revenue neutral reform, with two VAT rates, which applies the reduced VAT rate also to female and babies sanitary products.

Keywords: redistributive effects; simulation; taxation; Value Added Tax (search for similar items in EconPapers)
JEL-codes: H2 H22 H23 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2021-03
New Economics Papers: this item is included in nep-acc, nep-cmp, nep-eur, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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