Our main tool is the Indirect Tax Tool of EUROMOD (ITT) which extends the scope of EUROMOD simulations, allowing for the simulation of consumption taxes.
To simulate indirect tax liabilities, the ITT combines the underlying microdata of EUROMOD with household expenditure information for around 200 commodity categories from Household Budget Surveys.
Starting from the household disposable income simulated by EUROMOD, the ITT applies the consumption taxation rules in place in each country to simulate adjusted household disposable income, i.e., income after direct taxes, cash benefits and indirect taxation. Hence, the ITT enables researchers to model and analyze the redistributive and budgetary impact of changes in consumption tax rates, tax exemptions and broader price-side policies (e.g., price caps).
Through this tool, policymakers and researchers can better understand how changes in consumption taxes may affect households' income levels and inequality, aiding evidence-based decision-making, and policy design.
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