Prototype of country IT microsimulation model (IRAP, Social Contributions, Corporate Tax)

This report presents the potential use of the DIECOFIS microsimulation model in an European framework as a tool to evaluate benefits and costs of fiscal competition or tax harmonization. In Section 2, the model structure is described while the list and desription of endogenous and exogenous variables is detailed in Appendix B and the code for running the model is in Appendix C. Three examples of policy analysis are reported in Section 3: a simulation of the economic effects of a comprehensive fiscal reform and a reform of the severance pay – both for the Italian economy – and a cross-country simulation between Italy and United Kingdom for R&D tax reliefs. These examples are meant to show the flexibility of use and the model capabilities. The sensitivity analysis for some module of the microsimulation model has been performed and results are presented in Appendix A.