CGE (Computable General Equilibrium) modelling

Research regarding CGE modelling

Title	Overview	Status
Dynamic tax compliance and tax debt	The Research Centre is also engaged in advancing general equilibrium modelling to better understand tax compliance and tax debt dynamics. These models capture the interaction between taxpayers, firms, and the tax administration within a broader economic environment, allowing researchers to study how enforcement policies, audit strategies, penalties, and payment arrangements affect behaviour across the economy. By incorporating heterogeneous agents, liquidity constraints, and sectoral linkages, the Centre’s work provides insights into how compliance decisions propagate through supply chains and how tax debt evolves under different institutional settings. This modelling approach helps tax authorities anticipate behavioural responses to policy changes, evaluate the macroeconomic implications of enforcement reforms, and design more effective, system-wide compliance strategies.	Ongoing
Improving the Realism of Tax CGE Models	This project aimed to develop the existing computable general equilibrium (CGE) model used by HMRC/HMT. The intention was to include within the model a richer tax structure and to exploit the ability of CGE models to trace the impacts of policy changes across the economy. The project examined issues such as the effect that changes in income taxes may have on consumption tax revenues, the way that income and consumption taxes interact to affect labour supply decisions, and the way in which income taxes could be used to offset some of the undesirable distributional effects of consumption tax changes (such as broadening the base of VAT). (See also Discussion Paper 020 - 18).	Completed

Title

Overview

Status

Dynamic tax compliance and tax debt

The Research Centre is also engaged in advancing general equilibrium modelling to better understand tax compliance and tax debt dynamics. These models capture the interaction between taxpayers, firms, and the tax administration within a broader economic environment, allowing researchers to study how enforcement policies, audit strategies, penalties, and payment arrangements affect behaviour across the economy. By incorporating heterogeneous agents, liquidity constraints, and sectoral linkages, the Centre’s work provides insights into how compliance decisions propagate through supply chains and how tax debt evolves under different institutional settings. This modelling approach helps tax authorities anticipate behavioural responses to policy changes, evaluate the macroeconomic implications of enforcement reforms, and design more effective, system-wide compliance strategies.

Ongoing

Improving the Realism of Tax CGE Models

This project aimed to develop the existing computable general equilibrium (CGE) model used by HMRC/HMT. The intention was to include within the model a richer tax structure and to exploit the ability of CGE models to trace the impacts of policy changes across the economy. The project examined issues such as the effect that changes in income taxes may have on consumption tax revenues, the way that income and consumption taxes interact to affect labour supply decisions, and the way in which income taxes could be used to offset some of the undesirable distributional effects of consumption tax changes (such as broadening the base of VAT).

(See also Discussion Paper 020 - 18).

Completed