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

Andrea Taddei ()
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Andrea Taddei: University of Genoa, Italy

No 9/2012, DEP - series of economic working papers from University of Genoa, Research Doctorate in Public Economics

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.

Keywords: direct and indirect taxation; fiscal microsimulation; progressivity; tax reform; redistribution (search for similar items in EconPapers)
JEL-codes: C81 D12 D63 H22 H31 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-acc, nep-cmp and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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