Income and budget data seldom are measured in the same dataset. In order to make simulations that need both, one requires a reliable procedure to merge an income and a budget survey into one combined dataset. This paper contains the comparison and evaluation of five different techniques to impute expenditures into income datasets: parametric estimation of Engel curves, nonparametric estimation, both constrained and unconstrained matching using a distance function and grade correspondence. After a detailed description of the methods as well as a comparison of the main pros and cons, their effectiveness is tested upon an artificially split data file. In general, the parametric and nonparametric estimation seem to yield the best results, generating imputed values that are closest to the observed values for the budget shares. JEL classification: C15, C51, C52, C81, H22, H31 DOI: https:// doi. org/ 10. 34196/ ijm. 00226

Shifting the tax burden from labor to consumption is proposed in many developed countries as a way to make the tax system more incentive compatible. This article deals with the simulation of such a policy change to sharpen the distributional picture. Expenditures are imputed into the EUROMOD microsimulation program. Then social security contributions are lowered and the standard VAT rate is increased to maintain government revenue neutrality. The main conclusions are that (1) indirect taxes are regressive with respect to disposable income but proportional or progressive with respect to total expenditures, and (2) indirect taxes are in any case less progressive than other components of the tax system, making the proposed measure a regressive one. A possible solution exists in increasing the progressivity of the remaining income tax. © 2010 by the Association for Public Policy Analysis and Management.

The goal of this paper is to simulate a tax shift from labour to consumption and perform a distributional analysis of the reform. Microsimulation programs are often uniquely focussed on the personal income tax system and on social security contributions and benefits. However, against a political background where income taxes are under increased pressure and alternative, less distortive forms of taxation come under consideration, microsimulation models enriched with expenditure data and consumption tax structures could play an important role in sharpening the (distributional) picture of such systemic changes. The current paper discusses an algorithm for this enrichment - mainly with VAT, excises and other consumption taxes - within the context of the EUROMOD-framework and applies the obtained program to the simulation of a decrease of social security contributions compensated by a rise in standard VAT rate to maintain government budget neutrality for four EU countries. The measure is found to have a (first order) regressive effect, pointing to the fact that keeping redistribution constant would require the remaining post-reform income taxation to become more progressive.

The majority of microsimulation models are confined to ex ante evaluations of reforms in the personal income tax system or in social security contributions and benefits. This paper reports on an incorporation of indirect taxes, mainly VAT, excises and other consumption taxes, in the EUROMOD-microsimulation model. We sharpen the distributional picture of the overall tax and benefit system by bringing the indirect tax incidence for five European countries into the picture. We investigate explanations for the regressivity, and study the distributional effect of an integrated simulation of changes in social security contributions and indirect taxes as compensating channels of collecting government revenue.