EUROMOD I-CUE feasibility study : Malta 2006 Tax-Benefit System’ as part of a project that involves the European Centre and the Institute for Social and Economic Research (ISER)

Abstract

The purpose of this study is to examine the technical feasibility of the microsimulation model application for the analysis of the impact of policy on social integration from the national as well as from the EU perspective. This is the first time that Malta’s tax-benefit system has been analysed from the angle of the main elements of this system implying the policy rules that are underlying the entitlement criteria defining them. This was an opportunity for the main players in this field to work in synergy on this vital issue: the Ministry for the Family and Social Solidarity, in charge of social benefits, the Ministry of Finance responsible for the fiscal policy and income tax system in particular, and the National Statistics Office tasked with income data collection based on the EU-SILC1 methodology. This Feasibility Study describes the situation as it was in the year 2006. Firstly, the study describes the main elements of the tax-benefit system, namely: income, income tax brackets, capital resources and Social Security contributions. The second section of the study illustrates the main sources of data to be used for modelling purposes and also shows the examples of the calculation of income tax and social benefits. It has been agreed that the EU SILC 2007 data would be used for the income element since Malta has joined this system of data collection way back in 2005. Regarding social benefits, the SABS2 database would be used, where all individual cases are available on daily, monthly or annual basis. The study also gives an overview of the auxiliary data sets that exist and can be used for checking and benchmarking purposes, once the modelling results become available. The third section of the study firstly outlines the qualities and limitations of the input data set. This section also focuses on specificities of Malta’s data collection and possible difficulties regarding model application. The study points at the possible combinations of sample and population databases. Also, simulation possibilities have been specified for both systems separately. Finally, the non-take up of benefits and the issue of tax and benefit fraud illustrate the situation and the possible unknown element on both sides.peer-reviewe