Modelling the Impact of Direct and Indirect Taxes Using Complementary Datasets

33 Pages Posted: 16 Mar 2015

See all articles by Michael Savage

Michael Savage

Economic and Social Research Institute, Ireland

Tim Callan

Economic and Social Research Institute, Ireland; IZA Institute of Labor Economics

Abstract

Comprehensive modelling of the impact of taxes and tax policy options requires data on the impact at micro-level of both direct and indirect taxes. There are, however, limits on the amount of data that can be gathered by any one survey. With some exceptions, most notably the Living Costs and Food Survey (LCF) in the UK, most national expenditure surveys are not suitable for use in detailed modelling of the direct tax and welfare system. This makes approaches which impute expenditure data into detailed income surveys of considerable interest. In this paper, we assess the sensitivity of the distributional effects of indirect taxes to the choice between actual, estimated and imputed expenditure data. By doing so, the analysis here serves as an updated picture of the distributional effects of the indirect tax system in Ireland, as well as a base for future microsimulation analysis of simultaneous direct tax, indirect tax and welfare reform.

Keywords: indirect tax, imputation, distribution, microsimulation

JEL Classification: D30, H22, H23, H24

Suggested Citation

Savage, Michael and Callan, Tim, Modelling the Impact of Direct and Indirect Taxes Using Complementary Datasets. IZA Discussion Paper No. 8897, Available at SSRN: https://ssrn.com/abstract=2578249

Michael Savage (Contact Author)

Economic and Social Research Institute, Ireland

Whitaker Square
Sir John Rogerson's Quay
Dublin 2
United States

Tim Callan

Economic and Social Research Institute, Ireland ( email )

4 Burlington Road
Dublin 4
Republic of Ireland

IZA Institute of Labor Economics ( email )

Bonn, D-53072
Germany

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