Capéau, Decoster and Güner (2022), Extension of the EUROMOD-ITT Tool

Capéau, C., Decoster, A. and Güner, D. (2022), Extension of the EUROMOD-ITT Tool, Final Report JRC Project no. JRC/SVQ/2020/OP/1373

This is the final report of the project Extension of the EUROMOD-ITT tool, JRC/SVQ/2020/OP/1373. It is the follow-up project of A new indirect tax tool for EUROMOD (JRC/SVQ/2018/B.2/0021/OC), and the first objective of the project is to extend the coverage of the EUROMOD Indirect Tax Tool (ITT).

The previous version of EUROMOD-ITT, henceforth ITTv3 , enriched the EUROMOD input EU-SILC data by imputing information on expenditures, using EUROSTAT Household Budget Surveys (HBS) and enabled EUROMOD users to simulate the effects of changes in indirect taxes (VAT and excises). ITTv3 runs for 18 countries and this project realises full EU coverage by the inclusion of Austria, Bulgaria, Estonia, Croatia, Luxembourg, Latvia, Malta, the Netherlands, and Sweden.

The second major contribution of the current project is to implement tax incidence parameters into the EUROMOD ITT. This new set of parameters allows for changes in indirect tax instruments not to be any more fully reflected in the new consumer prices, but being partially mitigated by letting producer prices to react to the indirect tax changes. Welfare and tax revenue implications for consumers of this producer price flexibility can now be assessed with the new ITT.