ABSTRACT
This chapter aims to bring novel evidence on the social impact of fiscal policies. It examines how taxes and benefits affect income distributions in the enlarged European Union (EU). The chapter reviews the underlying model and its input datasets and explains different income concepts used in the analysis. It presents and discusses the effect of different types of tax-benefit instruments on the structure of household incomes, income inequality and poverty. Most of the tax and benefit instruments can be simulated, except those for which work histories are required but usually not available in the cross-sectional survey datasets used as European Union-wide tax-benefit model (EUROMOD) input data. Tax-benefit systems on the whole reduce income inequality substantially, although to different extents. The chapter demonstrates that the new infrastructure in the form of an extended EUROMOD can provide further useful evidence in the future, enhancing not only policy-making but also the transfer of knowledge between the West and the East, in both directions.
