The Danish Law Model

Abstract

The Danish Law Model is a large system of databases and a number of models which allows the simulation of the effects of present or proposed legislation. The personal income tax model is just one of the models. The tax model is—like all other models in the system at present—a static microsimulation model. It is mainly used for distributional analysis, and for estimating the budget effects of proposed changes in tax legislation. It is not designed to be a revenue forecasting model, and it is seldom used as a stand-alone device. It is rather operated in combination with other models when it is necessary to take the effects of policy changes into account that occur outside the tax system. An example is the change in pension laws which also affects tax receipts (social pensions are taxable in Denmark). The structure of multiple databases makes it possible to build comprehensive models that can be very effective tools for such analysis.