How to Support (Political) Decisions? Presentation of a Micro-simulation Model to Assess the Implications of EU-wide Tax Reforms

Abstract

Part 2: Open Government Data and TransparencyInternational audienceCurrent discussions of possible tax reforms are characterized by an increasing relevance of related governments’ budgetary implications, thus, in this respect each tax reform proposal is reviewed in detail and an assessment of the consequences is essential from a political point of view. We developed the innovative micro-simulation model ASSERT (Assessing the Effects of Reforms in Taxation), which factors in changes in macro-economic conditions (GDP growth) as well as cross-border effects to analyze EU-wide tax reforms. To this end ASSERT is based on firm-level data, applies a forecasting algorithm and considers tax provisions for European countries. This paper presents the current version of the artifact as well as the development/evaluation process

Design, Implementierung und Anwendung eines dynamischen Mikro-Simulationsmodells zur Abschätzung von Steuerreformen in Deutschland und der Europäischen Union

“…Political decisions are supported by simulation models (Hohls, 2013;Oestreicher et al, 2014). They rely on macro-economic or company-individual data.…”

“…The micro-simulation model ASSERT regards investments relations (within a single country as well as cross-border) and applies a forecast of companies' future. Hence, ASSERT is able to assess the implications resulting from a tax reform for European companies for a future period (Hohls, 2013;Oestreicher et al, 2014). The logical structure of ASSERT can be divided into four modules (see Oestreicher et al (2014)): the forecasting process for year t (module 1), considering second round effects (module 2), calculating tax liabilities (module 3) and dividend distribution (module 4) which provides (financial) data for the next period.…”

“…The total sample of simulation companies covers about one million companies which are located in 19 EU-member states (Oestreicher et al, 2014). The simulation companies which are connected by shares are pooled in simulation group structures (Hohls, 2013). This paper considers 30,568 companies having a relation to a foreign (group parent) company or are member of a simulation group structure having a foreign group member.…”

“…All companies which are connected by shares are summarized in one simulation group and are treated as a set of companies. As a consequence, all companies' attributes are still available for the entire simulation period by limiting the number of treated companies and relations between shareholder and subsidiary are taken adequately into account (Hohls, 2013). Module 1 determines the ROA 5 by a combination of an AR(1) and non-parametric approach.…”

“…Items such as investments, sales, employees, costs of employees and operating turnover are forecasted by the non-parametric approach. Tangible and Intangible fixed assets are determined by previous year's value plus investments, other fixed assets and current assets influenced by companies' growth factor (Hohls, 2013;Oestreicher et al, 2014). Depreciation and Amortization are determined by applying local tax depreciation rules on companies' assets which are affected by investments.…”