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Research articles · Aug 31, 2011

Developing a static microsimulation model for the analysis of housing taxation in Italy

Simone Pellegrino, Massimiliano Piacenza, Gilberto Turati

School of Economics, Department of Economics and Public Finance “G. Prato”, University of Torino, Italy

Volume 4(2) Autumn 2011

Cite as: S. Pellegrino, M. Piacenza, G. Turati; 2011; Developing a static microsimulation model for the analysis of housing taxation in Italy; International Journal of Microsimulation; 4(2); 73–85. doi: 10.34196/ijm.00054

Abstract

In this paper we develop the first (static) microsimulation model aimed at studying the distributive impact of housing taxation on Italian households. We use as input data those provided by the Bank of Italy from its Survey on Households Income and Wealth, and discuss specific problems arising in the evaluation of cadastral income and of the Property Tax base. Our estimates of the distribution of taxpayers are very close to the Ministry of Finance official statistics; hence, our model can be seen as a reliable tool to evaluate the current distribution of housing taxation and the impact of potential tax reforms. Our simulations suggest that both Property Tax and Waste Management Tax show a moderate regressive impact with respect to household gross income, whilst the Personal Income Tax on dwellings other than the main residence is progressive. We then provide an application of our model, to study the Property Tax reform in 2008. Our findings show that all households owning the main residence gain from the 2008 reform, but tax cuts are mostly concentrated on the top three deciles of household equivalent gross income, so that the richest benefit most.

This article contains 2 figures and 11 tables.

Figures

Figure 1. Incidence of ICI and TARSU on main residences.
Figure 2. Incidence of House-PIT, ICI and TARSU on dwellings other than the main residence.

Tables

Table 1. Households main residences composition by tenure status.
Tenure Status Composition (%)
Owner occupiers (with or without mortgage) 68.7
Life-tenants 3.1
Tenants or occupiers under redemption agreement 21.3
Rent-free tenants 7.0
Total 100.0

Note: The total number of households is 2,34,81,999.

Source: Own calculations based on SHIW-BI.

Table 2. Composition of second homes owned by households by type of utilization.
Type of utilization Composition (%)
Life-tenants households 6.8
Free-rented to households 14.9
Rented to households 35.0
Unoccupied dwellings or holiday homes 43.3
Total 100.0

Note: The total number of dwellings is 1,00,52,261.

Source: Own calculations based on SHIW-BI.

Table 3. Composition of PIT taxpayers and mean gross income by work status.
Year 2006 Number of taxpayers Mean gross income (euro)
Work status Microsimulation model (A) Ministry of Finance official statistics (B) (A)/(B) Microsimulation model (C) Ministry of Finance official statistics (D) (C)/(D)
Employee 1,97,90,570 1,98,98,390 99.5 21,121 21,229 99.5
Pensioner 1,52,82,140 1,53,29,420 99.7 15,717 16,103 97.6
Self employed 41,65,622 39,89,143(a) 104.4 18,768 18,697(b) 100.4
Other taxpayer 22,55,637 12,41,749(c) 181.6 2,063 - -
Total 4,14,93,969 4,04,58,702 102.6 17,858 18,324 97.5

The statistic considers taxpayers with VAT code.

The number of these taxpayers has been evaluated as difference.

The mean value has been obtained considering taxpayers with positive and negative incomes.

Source: Own calculations based on SHIW-BI and Ministry of Finance 2008.

Table 4. Gross income distribution by income classes (all taxpayers).
Year 2006 Microsimulation model Ministry of Finance official statistics
Income class (euro) Composition (%) Mean (euro) Composition (%) Mean (euro)
0–1.000 6.8 344 5.0 453
1.000–3.000 3.7 2,000 5.1 1,934
3.000–5.000 3.7 4,065 4.1 3,998
5.000–7.500 11.7 6,243 12.2 6,093
7.500–10.000 6.9 9,037 8.3 12,365
10.000–15.000 17.9 12,543 16.6 12,586
15.000–20.000 20.6 17,363 16.9 17,409
20.000–25.000 11.2 22,466 11.7 22,316
25.000–29.000 5.8 27,047 6.2 26,862
29.000–40.000 5.8 34,201 7.4 33,355
40.000–50.000 2.1 44,076 2.3 44,373
50.000–70.000 2.2 58,374 2.0 58,554
70.000–100.000 1.1 82,539 1.2 82,242
100.000–150.000 0.4 123,343 0.5 119,149
oltre 150.000 0.3 298,685 0.3 284,662
Total 100.0 17,858 100.0 18,324

Note: The total number of taxpayers is 41,493,969.

Source: Own calculations based on SHIW-BI and Ministry of Finance 2008.

Table 5. Distribution of the main residence cadastral income considering PIT taxpayers.
Income class (euro) Compo-sition (%) Mean (euro)
0–1.000 9.7 219
1.000–3.000 3.9 299
3.000–5.000 3.0 252
5.000–7.500 10.2 266
7.500–10.000 6.3 345
10.000–15.000 16.0 322
15.000–20.000 19.0 354
20.000–25.000 11.6 403
25.000–29.000 6.4 432
29.000–40.000 6.6 463
40.000–50.000 2.3 590
50.000–70.000 2.8 646
70.000–100.000 1.5 744
100.000–150.000 0.4 920
Above 150.000 0.4 1,010
Total 100.0 363

Note: The total number of taxpayers is 24,319,766.

Source: Own calculations based on SHIW-BI.

Table 6. Distribution of overall income from dwellings considering PIT taxpayers.
Income class (euro) Compo-sition (%) Mean (euro)
0–1.000 9.8 276
1.000–3.000 4.1 586
3.000–5.000 2.9 708
5.000–7.500 10.0 541
7.500–10.000 6.2 784
10.000–15.000 15.6 724
15.000–20.000 18.5 784
20.000–25.000 11.7 1,305
25.000–29.000 6.5 1,702
29.000–40.000 6.8 2,645
40.000–50.000 2.5 3,745
50.000–70.000 2.9 6,031
70.000–100.000 1.5 10,816
100.000–150.000 0.5 21,733
Above 150.000 0.4 10,315
Total 100.0 1,455

Note: The total number of taxpayers is 2,64,46,945.

Source: Own calculations based on SHIW-BI.

Table 7. Distribution of Households by tenure status and decile of equivalent net income.
Tenure status
Decile Owner occupiers without mortgage or life-tenants Owner occupiers with mortgage Tenants or occupiers under redemption agreement Rent-free tenants Total
1 59.1 5.3 26.7 8.9 100.0
2 59.6 4.1 27.2 9.1 100.0
3 59.3 7.1 24.0 9.7 100.0
4 62.1 7.1 22.2 8.6 100.0
5 60.3 7.6 25.4 6.7 100.0
6 65.9 9.1 19.4 5.6 100.0
7 64.1 9.1 20.8 6.0 100.0
8 63.2 11.9 19.7 5.2 100.0
9 67.6 10.1 16.5 5.8 100.0
10 76.1 10.1 10.0 3.8 100.0
Total 63.6 8.1 21.3 7.0 100.0

Source: Own calculations based on SHIW-BI.

Table 8. Percentage of households with positive main residence cadastral income and its mean value by decile of equivalent gross income.
Decile Households(%) Mean value (euro) Mean value / household income (%)
1 64.4 366.4 5.0
2 63.7 362.0 2.9
3 66.4 367.3 2.3
4 69.2 406.4 2.3
5 67.9 494.3 2.5
6 74.9 483.8 2.0
7 73.2 508.6 1.8
8 75.1 570.4 1.8
9 77.7 668.0 1.7
10 86.2 903.9 1.3
Total 71.7 524.0 1.9

Source: Own calculations based on SHIW-BI.

Table 9. Percentage of households with positive other housing income and its mean value by decile of equivalent gross income.
Decile Household (%) Mean value (euro) Mean value / household income (%)
1 13.3 964.2 11.6
2 14.7 1,709.6 12.9
3 18.0 1,847.2 11.3
4 19.6 1,652.2 8.6
5 21.6 2,402.1 11.7
6 27.7 2,124.4 8.3
7 21.9 2,526.6 8.5
8 31.1 2,758.1 8.1
9 40.9 4,922.8 12.0
10 53.1 13,733.8 20.3
Total 26.0 4,862.8 14.1

Source: Own calculations based on SHIW-BI.

Table 10. Kakwani index.
Tax Kakwani index
Overall tax-benefit system 0.05261
House-PIT 0.00515
ICI 0.00002
TARSU -0.00090

Source: Own calculations based on SHIW-BI.

Table 11. Tax cuts distribution of the 2008 housing taxation reform.
Households with positive ICI (%)
2006 2008
Decile Main residence Other dwellings Total Main residence Other dwellings Total Distribution of the tax cuts between 2006 and 2008
1 43.0 18.8 49.4 0.0 18.8 18.8 4.7
2 44.2 22.3 53.8 0.0 22.3 22.3 4.8
3 48.6 24.7 57.0 0.0 24.7 24.7 5.3
4 52.1 24.7 59.0 0.0 24.7 24.7 6.3
5 57.9 25.6 63.2 0.0 25.6 25.6 8.6
6 64.0 32.1 72.1 0.0 32.1 32.1 8.9
7 65.6 26.1 70.9 0.0 26.1 26.1 9.5
8 69.3 33.9 73.8 0.0 33.9 33.9 11.7
9 74.2 44.0 80.5 0.0 44.0 44.0 15.0
10 83.9 55.5 89.6 0.0 55.5 55.5 25.0
Total 59.9 30.6 66.6 0.0 30.6 30.6 100.0

Source: Own calculations based on SHIW-BI.