Income taxes and benefits in the European Union (analyzes using the micro-simulation approach) 2400-ENSM038B

There are various solutions concerning social insurance and taxation of income from work in the European Union countries. Social insurance contributions (ZUS), contributions for general health insurance (NFZ) and personal income tax (PIT) are used in Poland but other countries have their solutions. Benefit solutions also vary across the EU countries. In Poland it consists of family benefits, nursing benefits, housing allowance and social assistance benefits.

It is very complicated to identify beneficiaries of the tax and benefit system, i.e., persons whose disposable income is higher than the gross wage, as well as net payers. In such a case it is worth using a microsimulation model. This method help to find out how the relationship between "what I earn" (gross salary) and my disposable income changes with gross salary and the characteristics of the household (e.g. number of children and their age, number of people in the household, marital status).

The tax and benefit microsimulation model consists of three parts: a computer program containing coded tax and benefit rules, a model database created from a large and representative household survey, and documentation describing the regulatory system. The first tax and benefit microsimulation models were developed in the late 1980s and were used to analyze the effects of changes in tax and benefit regulations on inequality of household disposable income. Initially, simulations were used for analyses using static non-behavioral models to:
1. comparing tax and benefit solutions applied in different countries from the point of view of their impact on the variation of household disposable income and financial incentives to work,
2. analysis of consequences of introduced or planned tax and benefit changes on the distribution of disposable income of households and their fiscal costs

Currently, tax-benefit models are used in behavioral and dynamic models, too. In the seminar we will mainly use the static approach.
The tool proposed in the seminar is the European tax and benefit model EUROMOD used by the European Commission for distributional analysis. The EUROMOD model uses micro-data from the Survey of Living Conditions and Income (EU-SILC). On the seminar, participants will work with this data covering information from over 16,000 households. Participants will be encouraged to use the training materials prepared by the "Developers" of the model.

The first part of the seminar is devoted to getting familiar with the construction of the model, the documentation and the "modeldata set" (EU-SILC and regulations). The second part is based on practical exercises with hypothetical data sets (HHoT module). The third part is to run and describe the simulations. Due to the nature of the analysis it is acceptable (even advisable!!!) to prepare a joint project by two people.