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This paper provides a short country-by-country harmonised analysis - using EUROMOD - of the distributional effects on household disposable income of direct tax and cash benefit policy changes between 2018 and 2019. It is the latest in this series of reports, available as EUROMOD working papers, produced annually on the public release of an updated EUROMOD. At the same time, last year's equivalent report - covering policy changes between 2017 and 2018 - has also been revised to account for the availability of more recent input micro-data, model extensions and corrections and finalised HICP values for 2018. In this paper, we show how changes (or non-changes) in tax-benefit policies have affected household incomes, abstracting from changes in the population characteristics (e.g. increased unemployment) and the distribution of market/original gross incomes in the years under consideration. The tax-benefit policies in a given year refer to those that applied on 30th of June. (.)

AbstractThis article examines the distributional impacts of changes to benefits, tax credits, pensions and direct taxes between the UK general elections of May 2010 and May 2015. The changes did not have a common effect on all household incomes; nor did the direct tax‐benefit changes contribute to deficit reduction. Effectively, reductions in benefits and tax credits financed part of the direct taxes cuts, but the overall net fiscal cost increased pressure for cuts in other public services and increases in other (more regressive) taxes. The main gains were in the upper middle of the income distribution, and the main losers were at the bottom and those close to, but not at, the very top. Across most of the distribution the changes were regressive. By comparing with other analyses of policy changes in the same period, we illustrate the importance of analytical choices and assumptions for detailed conclusions on their distributional effects. We also show how some groups were clear losers or gained little on average – including lone parent families, large families and families with younger children. Others were gainers, including two‐earner couples, and those in their fifties and early sixties. The findings show that a dominant feature of the period was that the combination of higher tax‐free income tax allowances, financed by cuts in benefits and tax credits, was generally regressive. As this combination also lies at the heart of the proposed policies of the Conservative government since 2015, we would expect these effects to be intensified in the coming years.

This paper examines the distributional impacts of the changes to benefits, tax credits, pensions and direct taxes between the UK Elections in May 2010 and in May 2015. It also looks ahead to the longer-term effects of changes and plans that were announced by the 2010-2015 Coalition government, such as the complete introduction of Universal Credit and changes to the ways benefits, pensions and tax brackets are indexed from year to year, modelling what effects these would have after five more years. It shows that the changes 2010-15 did not have a common effect on all household incomes and nor did the direct tax-benefit changes contribute to deficit reduction. In effect reductions in benefits and tax credits financed part of the cuts in direct taxes. We find that the relative extent to which the changes most favoured the rich or the poor is sensitive to a wide range of analytical choices and assumptions, but under most sets of assumptions the main gains were in the upper middle of the income distribution and the main losers were at the bottom and those close to, but not at, the very top. Across most of the distribution the impact of the changes was regressive. Looking forward to the effects that Coalition policies would have had by 2020 we find a more strongly regressive picture but with open questions about the effect of Universal Credit on those not currently receiving their entitlements to means-tested payments, and so potentially increasing some of the lowest incomes.

This paper provides an account of the construction of a tax-benefit microsimulation model for Namibia (NAMOD) which is based on the EUROMOD platform F6.0. Previous research on social security provision in Namibia is reviewed and the current social security, personal income tax and value added tax arrangements are outlined. Various strengths and weaknesses of the Namibian Household Income and Expenditure Survey (NHIES) as an underpinning dataset for NAMOD are highlighted. In particular, the income data in the NHIES is problematic and so analysis of the impact of policies on poverty should be treated with caution. In spite of these challenges, NAMOD provides a starting point from which government can explore issues such as promoting take-up of grants or making changes to the social security system.

We develop a behavioural micro simulation model (LuxTaxBen) that contains very precise information on income tax rules, as well as eligibility-rules for a number of welfare programs, such as social assistance, housing allowance etc. The model has been built specifically for analysing the Luxembourgish tax-transfer system whereby one can generate disposable income for various combinations of hours of work and welfare. It can be used for calculating accurate (net) household incomes conditional on labour supply while income tax rules and the various welfare benefit-levels are complicated functions of earned and unearned income. The LuxTaxBen is capable to handle almost all parts of the Luxembourg tax and transfer systems. Such a model has a great potential to be used for evaluating the effects of tax-benefit policy reforms and other changes on poverty, inequality, incentives and the governmental budget. It provides the users the opportunity to simulate the new rules in the Luxembourg tax-transfer system. The model consists of a number of modules such as module for child benefit, housing allowance, fees for child care. It is constructed in an integrated way so all the modules can be used together. This means that it is possible to analyses the interaction between the different transfer systems.

The Russian tax-benefit system consists of numerous types of support available to a large circle of beneficiaries; they are regulated by a number of legislative acts that focus on certain types of assistance rather than on vulnerable groups. In addition, the decentralization reform of social protection carried out in 2005 motivated many regional governments to implement their own social programs that differ in terms of design and generosity. So far, however, little is known about the impact of the tax-benefit policies on income distribution and poverty in Russia. This paper describes the construction of a tax-benefit microsimulation model for Russia (RUSMOD) which is based upon the EUROMOD platform. RUSMOD simulates the eligibility and receipt of most of the existing monetary policies at the federal and regional levels and assesses their potential redistributive effect. This paper aims to provide necessary background material on the construction of the model to anyone wishing to work with RUSMOD.

More than half of the EU countries have become poorer and more unequal since the start of the crisis in 2008. Despite lack of timely household micro data, using microsimulation techniques with up-to-date information on policy rules enables us to estimate the direct effect of tax-benefit policy changes in 2008-2014 on the income distribution, poverty and inequality levels in 10 EU countries, as well as track most recent trends by evaluating policy effects in 2013-2014. We identify and quantify these effects using the EU tax-benefit model EUROMOD to construct relevant counterfactual scenarios. Our results indicate that among these countries, most managed to pursue policies without adverse distributional effects, despite of challenging economic problems in this period. However, this has been accompanied by reductions in household income in several countries. There have also been some cases of clearly regressive changes in particular policy instruments. Overall, our results demonstrate the importance of comprehensive regular indexation to avoid the erosion of benefit amounts and tax thresholds over time, and specific population groups systematically gaining or losing relative to others.

Using counterfactual microsimulations, Shapley decompositions of time change in inequality and poverty indices make it possible to disentangle and quantify the relative effect of tax-benefit policy changes, compared to all other effects including shifts in the distribution of market income. Using this approach also helps to clarify the different issues underlying the distributional evaluation of policy reforms. An application to the UK (1998-2001) confirms previous findings that inequality and depth of poverty would have increased under the first New Labour government, had important reforms like the extensions of income support and tax credits not been implemented. These reforms have also contributed to substantially reduce poverty among families with children and pensioners.