A Tax Benefit Model for Policy Evaluation in Luxembourg: Luxtaxben

37 Pages Posted: 4 Sep 2015

See all articles by Nizamul Islam

Nizamul Islam

CEPS/INSTEAD

Lennart Flood

Goeteborg University - School of Business, Economics and Law; IZA Institute of Labor Economics

Abstract

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.

Keywords: micro simulation, distributional and behavioural effect, welfare

JEL Classification: C8, D31, H24

Suggested Citation

Islam, Nizamul and Flood, Lennart, A Tax Benefit Model for Policy Evaluation in Luxembourg: Luxtaxben. IZA Discussion Paper No. 9152, Available at SSRN: https://ssrn.com/abstract=2655101

Nizamul Islam

CEPS/INSTEAD ( email )

3, avenue de la Fonte
Esch-sur-Alzette, L-4364
Luxembourg

Lennart Flood (Contact Author)

Goeteborg University - School of Business, Economics and Law ( email )

Box 640
SE 405 30 Goeteborg
Sweden
+46 31 773 1331 (Phone)
+46 31 773 1043 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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