Counterfactual Assessment in the Design of Tax Reforms: Model Decomposition of Revenue and Redistribution Effects

Nuria Badenes Plá (), Borja Gambau Suelves () and Jose Labeaga
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Nuria Badenes Plá: Instituto de Estudios Fiscales
Borja Gambau Suelves: Analistas Financieros Internacionales (Afi), RedEv and Universidad Nacional de Educación a Distancia

Hacienda Pública Española / Review of Public Economics, 2023, vol. 245, issue 2, 179-208

Abstract: In this paper, we propose a methodology for the evaluation of tax reforms through the design of counterfactual scenarios using Euromod. For this purpose, we develop two theorical model decompositions to explain the differences in tax revenue collection and the redistributive impact. We provide empirical evidence by designing a tax reform in Spain based on the French personal income tax. The approach can explain the isolated causes of differences based on the contribution of the tax system design and the income distribution. This result could help determining whether policy recommendations should focus on pre-distribution or redistribution.

Keywords: Tax reforms; Counterfactual; Evaluation; Microsimulation; Euromod. (search for similar items in EconPapers)
JEL-codes: C60 D04 D63 H20 H24 J38 (search for similar items in EconPapers)
Date: 2023
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