JRC Working Papers on Taxation and Structural Reforms No 02/2021

This paper analyses the extent to which the tax-benefit systems of the EU Member States have protected household incomes during the COVID-19 pandemic. We makes use of EUROMOD, the EU tax-benefit microsimulation model based on 2018 EU-SILC data. Detailed aggregate labour market statistics combined with a novel approach to simulate transitions from work into monetary compensation schemes (short-time work schemes, as well as compensation schemes for self-employed) and into unemployment allows us to replicate the labour market conditions during the COVID-19 crisis in 2020 in the underlying EU-SILC data. Our analysis highlights that most of the countries analysed experienced a significant drop in market incomes, with poorer households hit the hardest. However, our findings also suggest that the tax-benefit systems of the EU Member States have been able to absorb a significant share of the COVID-19 shock, offsetting – or alleviating – its regressive nature on market incomes. Monetary compensation schemes implemented by EU Member States played a key role in cushioning against the fall in household income during the crisis.

CHRISTL Michael;  DE POLI Silvia;  FIGARI Francesco;  HUFKENS Tine;  LEVENTI Chrysa;  PAPINI Andrea;  TUMINO Alberto; 

2021-07-22

European Commission

JRC125567

https://publications.jrc.ec.europa.eu/repository/handle/JRC125567,