SInTax: microsimulation of VAT and Excises in the context of EUROMOD

Decoster, A. and Spiritus, K. (2016), SInTax: microsimulation of VAT and Excises in the context of EUROMOD, mimeo.

This user manual describes the operation of the SInTax (SImulation of Indirect Taxes) microsimulation module, developed to run alongside EUROMOD. We explain how Engel curves are estimated based on a household budget survey, by first estimating total durable and total nondurable expenditures, and next estimating in a number of steps budget shares on a number of categories of nondurable expenditures. Next we describe how expenditures on different expenditures categories are imputed into a different dataset, e.g. into a dataset used by a direct tax-benefit simulator such as EUROMOD, enabling the combined simulation of direct and indirect taxes. We explain how aggregate implicit tax rates are calculated for categories of expenditures, enabling the simulation of household expenditures after an indirect tax reform. We show how welfare effects of such a reform are calculated. In the second part of this manual we explain how the model is used in practice, preparing all the estimations and configuration files necessary to run a simulation. The final section discusses the integration of the model into EUROMOD.