IMF TaxFit Model Methodology and User Guidebook

The TaxFit microsimulation model computes the taxes payable and benefits receivable by hypothetical households for a growing list of countries. This manual outlines the underlying assumptions and provides guidance on using both the model and the online tool.
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Volume/Issue: Volume 2025 Issue 008
Publication date: May 2025
ISBN: 9798229000987
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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Labor , Economics- Macroeconomics , Taxation - General , tax , social protection , simulation , work incentives , employment , informal work , effective tax rates , Income , Wages , Social security contributions

Summary

The TaxFit microsimulation model calculates the taxes payable and benefits receivable by hypothetical households across an expanding list of countries. It simulates personal income taxes and social security contributions for all adults in a household, as well as family benefits, social assistance, in-work benefits, and caregiver support. Users define household characteristics—such as gross income levels and family composition—to facilitate cross-country comparisons of tax burdens and benefit generosity. When microdata is available, it can be uploaded to generate diagnostic indicators that better reflect the population, assess the distributional effects of tax and benefit reforms, and estimate fiscal costs. This technical manual provides a detailed overview of the TaxFit model, explains its underlying assumptions, and offers guidance on using the Stata-based model and its associated online tool.