Designing the optimal personal income tax in Iran using a microsimulation model

One of the most important issues in designing a tax on aggregate personal income is the specification of tax rates and brakets. The purpose of this[s1] study is to design the optimal framework of personal income tax in terms of tax rates and brakets and to evaluate its effects. In doing so, microsimulation model is used and required micro data were obtained using the Household Expenditure Survey of Iranian Statistics Center in 2017.[s2] The tax rates, income brackets, deductions, exemptions, and subsidies to low-income people have been determined in such a way that the best works are determined according to the [s3] gini coefficient and progressivity index, with the restriction of providing current amount of tax revenue for the government. The results show that by introducing the new personal income tax, while maintaining the government's tax revenues and paying a negative tax to the low-income, horizontal inequality (measured by the Gini coefficient) and vertical inequality (measured by the Progressivity Index) can be significantly improved.