The present study explores the distributional impact on Greek households of the tax reform measures proposed by the Tax Reform Committee in its final report. A deeper understanding of the structure of the present and potential tax systems is of crucial importance for both the welfare of citizens and government budgets, so that exploring the implications of different policy alternatives on distributional grounds is one important issue concerning both policy makers and the general public. The analysis focuses on indirect taxes and the personal income tax, which together yield over three quarters of total tax revenue.

The structure of the report is as follows. Section 2 assesses the quality of the main input data set, namely the 1998/9 Household Expenditure Survey in several key aspects concerning sample representativeness. Any microsimulation analysis of taxation inherently involves the adoption of choices on certain methodological issues. Section 3 makes these choices explicit and defends them on the grounds of both theoretical guidance and practical considerations regarding data quality. Sections 4 and 5 focus on the analysis of the distributional features of the existing tax structure. This is the basis against which the differential effects of the tax reform will be evaluated. In section 4, we evaluate the distributional effects of the indirect tax system. More specifically, in this section we explore the distribution of the indirect tax burden among Greek households, as well as the key variables that determine it. In section 5 an attempt is being done to evaluate distributional aspects of personal income taxes on the basis of tax return data. Finally, section 6 explores in detail distributional aspects of the reforms proposed by the Tax Reform Committee on indirect taxation and personal income taxation. In the case of indirect taxation, the analysis is performed, where possible, for each reform measure separately and also for alternative composite tax reform scenarios under alternative assumptions about household behavioural responses.