research paper · preprint

An open firm-level microsimulation of the UK VAT registration threshold

The paper builds an open synthetic population of UK businesses — calibrated to HMRC, ONS, and OBR statistics — and uses it to price level, shape, and rate reforms of the VAT registration threshold on a common base, with the threshold's dominated region as an elasticity-free measure of the distortion each reform removes.

anchor result

On a common £175.4bn 2023–24 base: raising the threshold to £100,000 costs £876m, a graduated taper over £85k–£141.7k costs £1,525m, and 10%/15% reduced-rate bands £515m/£258m.

method

2.94M synthetic firm records weighted to 2.41M UK firms, calibrated to administrative band aggregates, with net liability built structurally from value added.

discipline

Band-calibrated data support no bunching inference: the baseline excess mass is a readback of the OBR targets, swinging from zero to ~25,100 across specifications, so the paper computes no elasticities from bunching.

author

Vahid Ahmadi, PolicyEngine. Preliminary and incomplete; comments welcome.