Estimation of Tax and Social Insurance Burden on Households: Verification of the Validity and Assessment of Actual Status

In recent years, household micro data has been streamlined in Japan. Based on this environmental development, the number of analyses using household micro data (questionnaire information) has increased in the fields of taxation and social securities. With the regard to taxes and social insurance premiums for each household account in these analyses, there are two cases: (1) using burdens reported in the questionnaire (Reported Value), and (2) using burdens calculated by applying information, such as family unit, income, etc. reported in the questionnaire to the actual system (Imputed Value). We used household micro data from the National Survey of Family Income and Expenditure (NSFIE) in 2009 by the Ministry of Internal Affairs and Communications, and estimated the imputed values of tax and social insurance burdens (such as income tax, residence tax, consumption tax, pension insurance premium, health insurance premium, long-term care insurance premium and employment insurance premium) on households. On that basis, we verify the validity of imputed value by comparing it with reported value, and assess the actual status of fiscal burden on household. The NSFIE is pointed out that the reported values of income tax and social insurance premium are underestimated by the effect of seasonality. Therefore, for verifying the validity of imputed value, we need to focus on the case of residence tax that is less affected by seasonality. And, it was found that the mean disparity between the reported and imputed values was zero and the dispersion was approximately 3% to income. For the implication of the examination, the imputed value has almost no bias in relation to tallied macro values, and it results in an estimated value with almost no error. Therefore, its accuracy can be used sufficiently for the assessment of policies. The underestimation of reported value may result from the possibility that tax and social premium burdens related to bonuses out of survey period are not reflected completely in the statistics. From the result of examination, such a hypothesis was supported. In addition, the total fiscal burden on household including taxes and social insurance premiums is progressive both in all samples and in each age bracket. The social insurance premiums and consumption tax have effects to reduce the progressivity. In particular, these are shown up strongly in the elderly generation. Therefore, the progressivity of fiscal burden is smaller in the elderly generation, which implies that intra-generational redistributive effect is weaker in the elderly.

Taro Ohno & Takahiro Kodama, 2017. "Estimation of Tax and Social Insurance Burden on Households: Verification of the Validity and Assessment of Actual Status," Discussion papers ron289, Policy Research Institute, Ministry of Finance Japan.

Handle: RePEc:mof:wpaper:ron289

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