A concern about a more extensive use of the Value Added Tax (VAT) in national tax systems often arises both from its impact on aggregate consumption and its alleged regressivity over income. Yet, the empirical evidence on this latter issue is still narrow mainly due to the lack of joint data on income and expenditures with enough detail to account for commodity-speci c tax rates. After discussing relevant problems in the measurement of VAT incidence over current income-which are likely to cause severe upward bias in the estimated regressivity-the paper aims at analysing the distributional implications of di ferent VAT structures. In a framework of marginal tax reforms, relying on the concept of Gini elasticity (Yitzhaki, 1983), a general methodology is proposed to analyse and improve the distributional pro le of VAT over income. Using a static microsimulation model (EGaLiTe), the methodology is applied on a comprehensive dataset of expenditures and incomes obtained by a statistical matching of two di ferent sources representative of the Italian population. It is shown that an alternative allocation of goods among existing rates could mitigate the regressive pro le of the 1 The opinions expressed here are those of the author and do not re ect the positions of the Institution. I J M (2017) 10(1) 39-72 40 tax over income, and that a properly designed two-rate setting could even improve the distributional outcome compared with the current setting. Finally, behavioural responses to tax-driven price changes are also simulated in order to assess the potential impact of the proposed reforms on aggregate expenditures.
The Ageing Working Group (AWG) assesses the long-term sustainability of public finances by presenting a set of public expenditure projections for all Member States, including projections on pensions. These projections are based on demographic forecasts and agreed assumptions on key economic variables. The adequacy and sustainability of pensions are, however, two sides of the same coin and a full assessment of pensions therefore requires integration. This paper applies the dynamic micro-simulation model MIDAS to assess the consequences of the AWG projections and assumptions on the future adequacy of public pensions in Belgium, Germany and Italy. A comparison of the simulation results suggests that the impact of the parametric pension reform in Belgium and Germany and the systemic reform in Italy on (re) distribution and the risk of low-income go in the same direction, but that the magnitudes differ. Indeed, the impact is stronger in Italy than in Belgium and Germany. In the latter especially, important changes safeguarding the sustainability of the pension system seem to have had a relatively small impact on the risk of low-income among pension benefit recipients in particular.
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