1. Taxes and benefits
Download icon

A general microsimulation model for the EU VAT with a specific application to Germany

  1. Lars-H. R. Siemers  Is a corresponding author
  1. University of Siegen, Germany
Research article
Volume 7(2) Autumn 2014
Cite this article as: L. R. Siemers; 2014; A general microsimulation model for the EU VAT with a specific application to Germany; International Journal of Microsimulation; 7(2); 40-93. doi: 10.34196/ijm.00100
9 tables

Tables

Table 1
The different VAT rates of the EU member states in 2014.
Country Super reduced Reduced Standard Parking
Belgium 6/12 21 12
Bulgaria 9 20
Czech Republic 15 21
Denmark 25
Germany 7 19
Estonia 9 20
Greece 6.5/13 23
Spain 4 10 21
France 2.1 5.5/10 20
Croatia 4 10 21
Ireland 4.8 9/13.5 23 13.5
Italy 4 10 22
Cyprus 5/9 19
Latvia 12 21
Lithuania 5/9 21
Luxemburg 3 6/12 15 12
Hungary 5/18 27
Malta 5/7 18
Netherlands 6 21
Austria 10 20 12
Poland 5/8 23
Portugal 6/13 23 13
Romania 5/9 24
Slovenia 9.5 22
Slovakia 10 20
Finland 10/14 24
Sweden 6/12 25
United Kingdom 5 20

  1. Source: European Commission (2014), situation at 13th January 2014. – Rates in %; two numbers in column “reduced” separated by “/” represent two different reduced VAT rates.

Table 3
Simulation results for 2008.
category [billion €] Value Fraction in %
VAT revenue simulated 174.48 100
  VAT open 126.00 72.2 100
   VAT due to τ’ 110.99 63.6 88.1
   VAT due to τ’ 15.01 8.6 11.9
  VAT hidden 33.25 19.1 100
   Investment housing 20.37 11.7 61.3
   Medical services 7.07 4.1 21.3
   Social security system 0.96 0.5 2.9
   Private insurances 4.85 2.8 14.6
  VAT non-residential 3.77 2.2
  VAT territorial authorities 11.46 6.6 100
   On gross investment 6.09 3.5 53.2
   On inputs 5.37 3.1 46.8
VAT officially reported 175.99 100.9
  Correction for phase difference −0.77 0.4
VAT officially reported, comparable 175.22 100.4
  Revenue correction factor cfrev 1.004
Fraction of total gross consumption
  Standard rate τs 53
  Reduced rate τr 17
  Rate of zero 30
Fraction of total neta consumption taxed by
  Standard rate τs 49
  Reduced rate τr 18
  Rate of zero 33
Reliefb in total (open) 86.14 49.4 100
  By reduced rate (open) 25.73 14.7 29.9
  By exemptions (open) 60.41 34.6 70.1
  1. a

    ‘Net’ means ‘before VAT’.

  2. b

    Relief compared to the benchmark where all goods would be taxed at standard rate τ’.

  3. Source: Simulation with the extended RWI-VAT-SIM, mainly based on Income and Expenditure Survey 2008 (scientific use file of Siegen University, 80% sample of survey), Destatis (2012a), Destatis (2012b), and own estimations.

Table 2
Under-reporting in IES2008 and correction factors.
Expenditure [billion €]a IES2008 National Account Coverage Correction Factora
Priv. consumption of residentials 1061.94 1317.31 0.81 1.24
abroad 21.07 62.05 0.34 2.95
Goods taxed at reduced rate
Food 119.56 1149.14 0.80 1.25
Soft drinks 13.59 17.44 0.78 1.28
Medical utilities 8.90 22.95 0.39 2.58
Traffic, w/o air traffic 12.08 19.33 0.63 1.60
Cut flowers 10.49 10.05 1.04 0.96
Activities (culture, sport, leisure) 13.86 32.96 0.42 2.38
Books, magazines, newspapers 13.76 19.08 0.72 1.39
Accommodation (hotel etc.) 12.15 12.99 0.94 1.07
Goods that are exempted
Actual rent payments 106.65 92.73 1.15 0.87
Assumed rents for owners 128.53 127.20 1.01 0.99
Medical services 22.47 39.75 0.57 1.77
Vehiclesb 57.03 65.12 0.88 1.14
Air traffic 4.41 13.80 0.32 3.13
Post/mail and courier services 2.60 2.43 1.07 0.94
Broadcasting fees 7.87 n.s.c n/ad 1.02e
Lotto and gamble 5.08 9.57 0.53 1.88
Education 9.64 12.66 0.76 1.31
  1. a

    Numbers are rounded, which may explain potential deviations.

  2. b

    Exempted are only the majority of used cars, but these are not specified in the national account data, so that the correction factor of vehicles in general is used.

  3. c

    n.s. – not specified.

  4. d

    n/a – not applicable.

  5. e

    The German collect-charges institution (GEZ) reported for 2008 a revenue of € 7.26 billion. In Germany there are, besides these fees for the public-law broadcasting, however, further charges for private TV channels. The turnover from subscriptions and pay-per-view of the market leader amounted to € 0.77 billion (Premiere 2009: 33). Given there were no noteworthy competitors, the correction factor is estimated by (7.26+0.77)/7.87 = 1.02.

  6. Source: Income and Expenditure Survey 2008, Destatis (2012a), Premiere (2009), and own calculations.

Table 4
Overall VAT burden in 2008.
% of HNI a % of net consumption % of gross consumption
Average burden 9.2 13.2 11.9
Mean ratio b 10.5*** 13.7*** 12.4***
[10.4, 10.6] [13.7, 13.7] [12.3, 12.4]
Median ratio b 9.6*** 13.8*** 12.5***
[9.6, 9.7] [13.8, 13.8] [12.4, 12.5]
  1. a

    HNI – annual household net income.

  2. b

    Significance levels: * p< 0.05 , ** p < 0.01, *** p< 0.001; 95% confidence intervals in brackets, based on Huber-White corrected standard errors.

  3. Source: Simulation with the extended RWI-VAT-SIM, mainly based on Income and Expenditure Survey 2008 (scientific use file of Siegen University, 80% sample of survey), Destatis (2012a), Destatis (2012b), and own estimations.

Table 5
Group-specific household income and VAT burden in 2008.
(1) (2) (3) (4)
HNI a VAT payment b Median ratio Ratio (2)/(1)
(median in €) (median in €) (in %) (in %)
Net equivalence income decile (sqrt-OECD)c
1 9,092 1,072 11.2 11.8
2 12,924 1,545 10.9 12.0
3 18,772 1,950 10.7 10.4
4 23,512 2,347 10.3 10.0
5 27,576 2,699 10.0 9.8
6 31,752 3,010 9.5 9.5
7 36,936 3,370 9.1 9.1
8 43,880 3,828 8.6 8.7
9 54,932 4,373 7.8 8.0
10 79,452 5,265 6.5 6.6
Net equivalence income bracket (sqrt-OECD)
Below € 10,000 8,968 1,063 11.3 11.8
10,000 to 20,000 18,592 2,019 10.6 10.9
20,000 to 30,000 34,068 3,198 9.3 9.4
30,000 to 40,000 50,568 4,165 8.1 8.2
40,000 to 50,000 64,412 4,830 7.3 7.5
50,000 to 60,000 77,328 5,254 6.6 6.8
60,000 to 70,000 91,544 5,729 6.3 6.3
70,000 to 80,000 105,500 5,825 5.3 5.5
80,000 to 90,000 118,240 6,121 5.1 5.2
90,000 to 100,000 133,388 6,584 4.6 4.9
100,000 to 110,000 148,700 7,436 5.0 5.0
110,000 to 120,000 158,012 5,643 4.3 3.6
€ 120,000 or more 177,244 4,761 3.1 2.7
Household type
Single 17,400 1,756 10.2 10.1
Single parent: 1 child 21,140 2,211 10.3 10.5
Single parent: 2 or more children 26,948 2,733 10.2 10.1
Pair: no child 34,676 3,293 9.4 9.5
Pair: 1 child 44,616 3,971 9.0 8.9
Pair: 2 children 50,360 4,428 8.8 8.8
Pair: 3 or more children 53,912 4,681 8.8 8.7
Other 43,600 3,795 8.9 8.7
Social class
Self-employed farmer 40,352 4,004 10.6 9.9
Self-employed business/craftsman, freelance 41,208 3,634 8.9 8.8
Public servant 49,832 3,867 8.1 7.8
White-collar worker 34,964 3,196 9.2 9.1
Blue-collar worker 35,332 3,248 9.4 9.2
Unemployed 11,860 1,278 10.6 10.8
Retired employee 22,164 2,262 10.2 10.2
Retired public servant 47,952 3,802 8.1 7.9
Other non-working 12,084 1,369 10.8 11.3
Gender of main income earner
Male 35,764 3,289 9.3 9.2
Female 20,548 2,102 10.1 10.2
Total 28,516 2,748 9.6 9.6
  1. a

    HNI – annual household net income.

  2. b

    Annual VAT payment.

  3. c

    Deciles and income brackets are calculated based on net equivalence income, which, following the OECD’s square-root approach, is determined by (annual) household net income divided by the square root of the number of members of household.

  4. Source: Simulation with the extended RWI-VAT-SIM, mainly based on Income and Expenditure Survey 2008 (scientific use file of Siegen University, 80% sample of survey), Destatis (2012a), Destatis (2012b), and own estimations.

Table 6
Mean VAT Burden in 2008.
Mean VAT-burden
On HNI a (in %) On gross consumpt. (in %) On net consumpt. (in %) In € p.a.
Net equivalence income decile (sqrt-OECD) b
1 15.0 11.2 12.3 € 1,267
2 11.6 11.7 12.9 € 1,730
3 11.4 12.2 13.5 € 2,160
4 11.1 12.4 13.7 € 2,591
5 10.7 12.6 14.0 € 2,963
6 10.3 12.6 14.0 € 3,298
7 9.8 12.7 14.1 € 3,679
8 9.2 12.7 14.2 € 4,104
9 8.6 12.8 14.2 € 4,779
10 7.1 12.7 14.1 € 5,858
Household type
Single 11.1 12.2 13.4 € 2,034
Single parent: 1 child 10.9 12.1 13.3 € 2,511
Single parent: 2 or more children 10.5 11.8 13.0 € 3,042
Pair: no child 10.3 12.5 13.9 € 3,759
Pair: 1 child 10.0 12.7 14.1 € 4,413
Pair: 2 children 9.4 12.5 13.9 € 4,843
Pair: 3 or more children 9.3 12.2 13.5 € 5,175
Other 9.6 12.5 13.8 € 4,316
Social class
Self-employed farmer 14.2 12.8 14.2 € 4,531
Self-employed business/craftsman, freelance 10.2 12.7 14.1 € 4,278
Public servant 8.9 12.2 13.6 € 4,353
White-collar worker 9.8 12.9 14.3 € 3,714
Blue-collar worker 10.2 12.7 14.1 € 3,517
Unemployed 11.3 11.2 12.2 € 1,513
Retired employee 11.1 12.0 13.3 € 2,625
Retired public servant 9.2 11.6 12.9 € 4,274
Other non-working 15.4 11.3 12.5 € 1,715
Gender of main income earner
Male 10.2 12.5 13.8 € 3,710
Female 11.0 12.2 13.5 € 2,543
Total 10.5 12.4 13.7 €3,243
  1. a

    HNI – annual household net income.;

  2. b

    Deciles are calculated based on net equivalence income, which, following the OECD’s square-root approach, is determined by (annual) household net income divided by the square root of the number of members of household.

  3. Source: Simulation with the extended RWI-VAT-SIM, mainly based on Income and Expenditure Survey 2008 (scientific use file of Siegen University, 80% sample of survey), Destatis (2012a), Destatis (2012b), and own estimations.

Table 7
Group-specific propensity and structure of consumption in 2008.
Mean (in %)
Consumpt. prop a Standard rate b Reduced rate b Exemptions b
Net equivalence income decile (sqrt-OECD)c
1 130.3 40.8 20.7 38.4
2 99.1 44.1 20.8 35.2
3 94.0 47.3 19.9 32.7
4 89.8 48.5 19.1 32.3
5 85.4 50.2 18.6 31.1
6 81.9 50.8 18.0 31.3
7 77.9 51.2 17.6 31.2
8 73.2 51.6 17.0 31.4
9 67.8 52.2 16.1 31.6
10 56.8 52.7 15.0 32.3
Household type
Single 92.0 46.9 17.4 35.7
Single parent: 1 child 91.4 47.5 19.2 33.3
Single parent: 2 or more children 90.2 46.8 20.7 32.5
Pair: no child 83.2 50.5 18.7 30.8
Pair: 1 child 79.5 51.7 18.5 29.8
Pair: 2 children 75.1 50.8 18.9 30.2
Pair: 3 or more children 76.3 49.1 20.2 30.7
Other 78.4 49.5 18.6 31.9
Social class
Self-employed farmer 111.7 50.4 17.9 31.8
Self-employed business-/craftsman, freelance 80.8 50.3 16.8 32.9
Public servant 73.5 50.8 16.0 33.2
White-collar worker 76.9 51.7 17.2 31.1
Blue-collar worker 81.3 50.7 18.6 30.6
Unemployed 100.6 42.2 20.7 37.2
Retired employee 92.4 46.6 19.6 33.8
Retired public servant 78.6 47.4 16.4 36.1
Other non-working 132.0 44.5 18.5 37.0
Gender of main income earner
Male 82.3 49.9 18.2 31.9
Female 90.6 47.6 18.4 34.0
Total 85.6 49.0 18.3 32.8
  1. a

    The propensity to consume is consumption viable to VAT divided by household net income (in %);.

  2. b

    Net consumption burdened by τx , x = {s, r, 0}, as a fraction of total net consumption viable to VAT openly.

  3. c

    Deciles are calculated based on net equivalence income, which, following the OECD’s square-root approach, is determined by (annual) household net income divided by the square root of the number of members of household.

  4. Source: Simulation with the extended RWI-VAT-SIM, mainly based on Income and Expenditure Survey 2008 (scientific use file of Siegen University, 80% sample of survey), Destatis (2012a), Destatis (2012b), and own estimations.

Table 8
Financing of VAT Budget in 2008.
Freq. (in millions) Fraction (in %) Sum (in %) Inv sum. (in %) Fraction a (in %) Acc. fract. (in %) Inv. fract. (in %)
Net equivalence income decile (sqrt-OECD) b
1 4,404 10.0 10.0 100.0 3.9 3.9 100.0
2 4,403 10.0 20.0 90.0 5.3 9.2 96.1
3 4,404 10.0 30.0 80.0 6.7 15.9 90.8
4 4,403 10.0 40.0 70.0 8.0 23.9 84.1
5 4,404 10.0 50.0 60.0 9.1 33.0 76.1
6 4,405 10.0 60.0 50.0 10.2 43.2 67.0
7 4,402 10.0 70.0 40.0 11.3 54.5 56.8
8 4,403 10.0 80.0 30.0 12.7 67.2 45.5
9 4,403 10.0 90.0 20.0 14.7 81.9 32.8
10 4,403 10.0 100.0 10.0 18.1 100.0 18.1
Net equivalence income bracket (sqrt-OECD) b
Below € 10,000 4,193 9.5 9.5 100.0 3.7 3.7 100.0
10,000 to 20,000 15,669 35.6 45.1 90.5 24.7 28.4 96.3
20,000 to 30,000 12,944 29.4 74.5 54.9 31.7 60.1 71.6
30,000 to 40,000 5,847 13.3 87.8 25.5 18.5 78.5 39.9
40,000 to 50,000 2,727 6.2 94.0 12.2 10.0 88.5 21.5
50,000 to 60,000 1,242 2.8 96.8 6.0 5.0 93.5 11.5
60,000 to 70,000 605 1.4 98.2 3.2 2.7 96.2 6.5
70,000 to 80,000 321 0.7 98.9 1.8 1.4 97.6 3.8
80,000 to 90,000 174 0.4 99.3 1.1 0.9 98.5 2.4
90,000 to 100,000 115 0.3 99.6 0.7 0.6 99.0 1.5
100,000 to 110,000 64 0.2 99.7 0.5 0.4 99.4 1.0
110,000 to 120,000 53 0.1 99.8 0.3 0.3 99.7 0.6
€ 120,000 or more 80 0.2 100.0 0.2 0.3 100.0 0.3
Household type
Single 17,367 39.4 39.4 100.0 24.7 24.7 100.0
Single parent: 1 child 1,854 4.2 43.7 60.6 3.3 28.0 75.3
Single parent: 2 or more children 679 1.5 45.2 56.3 1.4 29.4 72.0
Pair: no child 12,798 29.1 74.3 54.8 33.7 63.1 70.6
Pair: 1 child 4,428 10.1 84.3 25.7 13.7 76.8 36.9
Pair: 2 children 3,995 9.1 93.4 15.7 13.6 90.4 23.2
Pair: 3 or more children 1,364 3.1 96.5 6.6 4.9 95.3 9.6
Other 1,548 3.5 100.0 3.5 4.7 100.0 4.7
Social class
Self-employed farmer Self-employed 222 0.5 0.5 100.0 0.7 0.7 100.0
business-/craftsman, freelance 2,506 5.7 6.2 99.5 7.5 8.2 99.3
Public servant 1,710 3.9 10.1 93.8 5.2 13.4 91.8
White-collar worker 14,472 32.9 42.9 89.9 37.6 51.1 86.6
blue-collar worker 7,055 16.0 59.0 57.1 17.4 68.4 48.9
unemployed 3,388 7.7 66.7 41.0 3.6 72.0 31.6
retired employee 11,640 26.4 93.1 33.3 21.4 93.4 28.0
retired public servant 1,623 3.7 96.8 6.9 4.9 98.3 6.6
other non-working 1,417 3.2 100.0 3.2 1.7 100.0 1.7
Gender of main income earner
male 26,401 60.0 60.0 100.0 68.6 68.6 100.0
female 17,632 40.0 100.0 40.0 31.4 100.0 31.4
  1. a

    Fraction of VAT revenue financed by the respective group, in %.

  2. b

    Deciles and income brackets are calculated based on net equivalence income, which, following the OECD’s square-root approach, is determined by (annual) household net income divided by the square root of the number of members of household.

  3. Source: Simulation with the extended RWI-VAT-SIM, mainly based on Income and Expenditure Survey 2008 (scientific use file of Siegen University, 80% sample of survey), Destatis (2012a), Destatis (2012b), and own estimations.

Table 9
Results of hotel-accommodation simulation for 2008.
(1) (2) (3) (4) (5) (6)
Status quo Static Semi-beh. 1 Semi-beh. 2 Semi-beh. 3 Semi-beh. 4 Unit
Accommodation expenditures 12.99 11.67 11.87 12.11 12.23 12.39 billion €
VAT rate 19 7 7 7 7 7 %
Assumed price n/ab 0 −0.13 (poor) −0.37 (poor) −0.426 −0.547 n/ab
elasticity a −0.15 (rich) −0.32 (rich)
VAT revenue 2.08 0.77 0.96 1.20 1.33 1.49 billion €
Budget effect by behavioral n/ab −1.32 −1.12 −0.88 −0.76 −0.60 billion €
responsec 0.00 0.19 0.43 0.56 0.72 billion €
  1. a

    In columns (3) and (4) elasticities are drawn from Clements and Qiang (2003), who provide estimates for poor and rich countries, that we used for the first to fifth decile (poor) and the sixth to tenth decile (rich); in column (5) and (6) elasticities are drawn from Chen (1999).

  2. b

    n/a – not applicable.

  3. c

    Budget effect by behavioral response of the consumers due to price elasticity.

  4. Source: Simulation with the extended RWI-VAT-SIM, mainly based on Income and Expenditure Survey 2008 (scientific use file of Siegen University, 80% sample of survey), Destatis (2012a), Destatis (2012b), and own estimations.

Download links

A two-part list of links to download the article, or parts of the article, in various formats.

Downloads (link to download the article as PDF)

Download citations (links to download the citations from this article in formats compatible with various reference manager tools)

Open citations (links to open the citations from this article in various online reference manager services)