Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/252329 
Year of Publication: 
2021
Series/Report no.: 
JRC Working Papers on Taxation and Structural Reforms No. 13/2021
Publisher: 
European Commission, Joint Research Centre (JRC), Seville
Abstract: 
We study a set of tax reforms introducing a budget-neutral tax shift in Italy, from labour income to consumption taxes. To this end we use a microsimulation model to provide the output with which to estimate the parameters of tax functions in an overlapping-generations computable general equilibrium model. In doing so we make marginal and average tax rates bivariate non-linear functions of capital income and labour income. The methodology allows for the representation of the non-linearities of the tax and social benefit system and interactions between capital and labour incomes. The linked macro model then simulates labour supply, consumption and savings in a dynamic setting, thus accounting for behavioural and general equilibrium effects within a life-cycle optimization framework. Our simulations show that a tax shift made by cutting personal income tax rates might bring significant efficiency gains in Italy, with limited regressive effects, notwithstanding the revenue-compensating increase in consumptions taxes.
Subjects: 
computable general equilibrium
overlapping generations
taxation
microsimulation
Italy
tax shift
JEL: 
H24
H31
D15
D58
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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