Technical Note
Top income adjustments and tax reforms in Ecuador: an application of ECUAMOD

This technical note has been produced alongside a WIDER working paper assessing the effects on income inequality and income tax simulations of adjusting top incomes of employees in survey data based on administrative tax records in Ecuador.

The paper and the technical note are based on ECUAMOD version 1.4. The aim of this technical note is to describe the methodology used to adjust top incomes in the National Survey of Income and Expenditures of Urban and Rural Households in Ecuador (Encuesta Nacional de Ingresos y Gastos de Hogares Urbanos y Rurales, ENIGHUR), 2011–12, which is the input data used in the tax-benefit model ECUAMOD.

It is divided in three sections. Section 1 describes the approach used to adjust top incomes in the survey based on information from tax records. Section 2 presents two alternatives to implement the adjustment in practice within the ECUAMOD framework. Section 3 discusses additional points to take into account on the topic of combining survey and tax records data, which could not be considered as part of the working paper but deserve attention for future research.

While the approach taken for such exercise has to be country-specific, the approach taken for ECUAMOD and illustrated here may provide helpful insights for similar exercises in other countries.