accounts. However, given that reported consumption in the household survey is lower than consumption in national accounts, the most appropriate validation is that total VAT collected in the survey as a ratio of total household consumption in the survey, is in line with the same comparison at the level of national accounts (VAT revenue vs private consumption). The analysis does not include VAT paid by businesses.

For **excises** , the exercise captures the direct effect of excises (i.e. excises paid directly by households when purchasing manufactured and specific imported goods subject to this tax), as well as the indirect effects that fuel taxes may have on products’ prices. The latter is done using an input-output matrix for Albania in 2013 with 35 categories, to then map household consumption expenditures from the HBS to the I/O production sectors. The excise is applied by measurement unit of the product, for which some assumptions were made in cases where the survey did not contain sufficient information to differentiate between products. This was the case, for example, for excises of beer which depend on the alcohol content, not observed in the survey. Based on local knowledge, it was assumed that beer contained on average 5 percent alcohol content. Similarly, on fuel spending, the survey does not contain information on quantity consumed but only on total expenditure. Quantities are estimated using average prices based on the monthly reports of the Ministry of Energy. In terms of evasion, the compliance gap for excises is estimated to also be large, as in VAT, and particularly for road fuels and cigarettes.<sup>26</sup> There usually is, however, also underreporting of this type of consumption items in the household survey (alcohol, cigarettes and others), pushing down the amount of VAT collected. As such, the exercise does not alter the tax rate to adjust for evasion as with VAT, and does not aim at identifying evasion at a broader level, given underreporting in the survey.

# **Social Spending: Education and Health**

On **education** , the survey does not identify school enrollment, neither in public nor in private schools. However, alternate sources of data indicate that school enrollment is high<sup>27</sup> and that access to public education is widespread in Albania. For instance, 98 and 97 percent of students in basic education and secondary, respectively, attend public schools. Most tertiary school students also attend public universities.<sup>28</sup> To identify beneficiaries of public spending on education, the method identifies age ranges by education system levels. Across education levels up to secondary, the strategy assumes universal coverage except for households who report education expenses on private education.<sup>29</sup> For those in tertiary and also excluding those who report expenses on private education, tertiary enrollment is assigned to those who are identified as students in the labor market module of the household survey and older than eighteen. Robustness checks compare the number of students in each level of the education system with administrative data of number of students enrolled in the public education system; results show that survey information is relatively close to that in administrative records.<sup>30</sup> Once we identified potential beneficiaries, we impute education spending among those identified as beneficiaries, the method uses both central government per capita spending, as well as prefecture-level per

> 26 IMF (2016).

> 27 For example, data from World Development Indicators show that the net enrollment rate in primary education is 96 percent and 85 percent for secondary school (2014).

> 28 Data from the Living Standard Measurement Survey, 2012.

> 29 In the HBS we have information on household education expenditures in the last month, by type (preschool, elementary, vocational, university, postgraduate), and by public/private.

> 30 For instance, we identify about 113,000 students in high-school using this method, compared to 125,000 in administrative data. For university students, we estimate 127,000 students in the survey vs. 136,419 in admin data.

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