Computing Tax Rates for Economic Modeling: A Global Dataset Approach

Joint Program Technical Note
Computing Tax Rates for Economic Modeling: A Global Dataset Approach
Gurgel, A., G. Metcalf, N. Osouf & J. Reilly (2007)
Joint Program Technical Note, 15 pgs

Note #11 [Download]

Abstract/Summary:

Much work on climate policy has shown that there can be significant tax interaction effects that affect the cost of climate policy. Many modeling exercises that examine climate policy costs rely on data compiled by the Global Trade Analysis Project (GTAP). Maintaining and improving the GTAP data set is a massive effort, and the construction of tax data is one area that has not received significant attention. We use global data sets on tax collections and the tax base, available for most major countries of the world, to develop revised estimates of capital, labor, and consumption tax rates for 57 major countries that account for the major share of gross world product. We also aggregate these tax rates to the regions we use in the Emissions Prediction and Policy Analysis (EPPA) model. We compare the revised tax rates with those in the GTAP data set and discuss reasons for the differences and the need for further work to resolve remaining discrepancies. While the data we use is far from ideal, we believe the revised tax rates we estimate represent an improvement particularly for global or multi-country analyses where consistency across countries is an important consideration.

Citation:

Gurgel, A., G. Metcalf, N. Osouf & J. Reilly (2007): Computing Tax Rates for Economic Modeling: A Global Dataset Approach. Joint Program Technical Note TN #11, 15 pgs (http://globalchange.mit.edu/publication/13812)
  • Joint Program Technical Note
Computing Tax Rates for Economic Modeling: A Global Dataset Approach

Gurgel, A., G. Metcalf, N. Osouf & J. Reilly

15 pgs
2007

Abstract/Summary: 

Much work on climate policy has shown that there can be significant tax interaction effects that affect the cost of climate policy. Many modeling exercises that examine climate policy costs rely on data compiled by the Global Trade Analysis Project (GTAP). Maintaining and improving the GTAP data set is a massive effort, and the construction of tax data is one area that has not received significant attention. We use global data sets on tax collections and the tax base, available for most major countries of the world, to develop revised estimates of capital, labor, and consumption tax rates for 57 major countries that account for the major share of gross world product. We also aggregate these tax rates to the regions we use in the Emissions Prediction and Policy Analysis (EPPA) model. We compare the revised tax rates with those in the GTAP data set and discuss reasons for the differences and the need for further work to resolve remaining discrepancies. While the data we use is far from ideal, we believe the revised tax rates we estimate represent an improvement particularly for global or multi-country analyses where consistency across countries is an important consideration.