Accounting for Tax Evasion Profiles and Tax Expenditures in Microsimulation Modelling. The BETAMOD Model for Personal Income Taxes in Italy

Abstract

The paper presents the main characteristics of BETAMOD, a static microsimulation model that reproduces the Italian personal income tax (IRPEF), as well as local income taxes, namely the regional and municipal additional income taxes, building on a detailed reconstruction of tax legislation. With respect to the vast majority of existing tax microsimulation models, the peculiarities of BETAMOD concern two aspects: the inclusion of a detailed set of tax expenditures, and the estimation of individual-specific tax evasion rates, which account for the total individual income level, its composition in terms of income sources, and the geographical area of residence.

Keywords: Tax-benefit microsimulation, tax evasion, tax expenditures, SILC, Italy

JEL Classification: C15, C63, H20, H24, H26, H31