Technical Notes and Manuals

IMF TaxFit Model Methodology and User Guidebook

By Julia Cots-Capell, Aieshwarya Davis, Duncan MacDonald

May 5, 2025

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Julia Cots-Capell, Aieshwarya Davis, and Duncan MacDonald. "IMF TaxFit Model Methodology and User Guidebook", Technical Notes and Manuals 2025, 008 (2025), accessed June 17, 2025, https://doi.org/10.5089/9798229000987.005

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Disclaimer: This Technical Guidance Note should not be reported as representing the views of the IMF. The views expressed in this Note are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

Subject: Employment, Expenditure, Income, Labor, Maternity and childcare benefit spending, National accounts, Social security contributions, Taxes, Wages

Keywords: Africa, Asia and Pacific, Effective tax rates, Employment, Employment earnings, Europe, Function argument, IMF Library, IMF TaxFit model methodology, Income, Informal work, Maternity and childcare benefit spending, Simulation, Social protection, Social security contributions, Tax, User guidebook, Wages, Work incentives

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