The simulations of other fiscal elements are less precise. This applies to such instruments as the salary tax (23.1 percent of the administrative aggregate) or means of transportation tax (35.3 percent). These ratios reflect lack of representativeness of the data at the higher end of income distribution and lack of detailed information in the data with the parameters of the fiscal system. The underrepresentation of richest households has consequences both on the direct side of taxes, given the high tax base and the progressivity of both the salary tax and means of transportation taxes, and the indirect side since expenditure of the top income households might be conducted more specifically in the formal sector and correspond in value with their high incomes.

The limited precision in modelling SSC/HI and salary taxes stems from the high degree of progressivity of tax contributions and lack of highest earners in the data. For example, there are only 13 people in the data who would be modeled to pay income tax at the highest rate of tax. While detailed information on the number earners who fall in the top income tax bracket is unavailable for detailed sensitivity analysis, it is clear that information on top incomes is not as precise in household data and the corresponding simulation of taxes simply cannot match the information in administrative statistics.

The observed difference between survey estimations and macro data is not unusual for taxes on several of the modeled consumption items.<sup>16</sup> The simulated values of indirect taxes less closely match administrative records. Estimations from the survey capture 59.2 percent of the total government revenue from VAT.<sup>17</sup> The undersimulation of some indirect taxes like the public lighting tax or alcohol tax in all sections of the income distribution might reflect underreporting of specific categories of goods such as tobacco and alcohol. Further, the undersimulation for expenditures also reflects the fact that not all final consumption is conducted by private households. VAT is also paid by public institutions and by the corporate sector for which the final sales are exempt from VAT. Additionally, some taxable incomes and a high proportion of some consumption items, like accommodation, are received and paid by visiting foreigners. Indirect subsidies (in this case the electricity subsidy) are simulated with an accuracy of 67.2 percent when compared to official statistics. However, the scale of the electricity subsidy is very small when compared to indirect taxes; according to government statistics, 134.9 billion KHR in 2019 was spent on the electricity subsidy in 2019, as opposed to 6,259.9 billion KHR in revenues from VAT alone.

> 16 See the appendixes for more details.

> 17 The total value of household consumption in the CSES 2019/20 is KHR 107,335.6 billion. According to the World Bank, GDP in 2019 was US$ 27.09 billion at official exchange rate and household consumption was 74% of GDP. This means: 27.09*4070*0.74 = KHR 81,590 billion; so less than observed in the data. So, with more consumption we catch less VAT. Usually this can be explained by government, NGO spending, intermediate VAT in zero-rated final goods. However, all of those are low in Cambodia. The only reasonable explanation seems to be that we miss consumption of very rich households which is likely to be subject to VAT. This would suggest though that household consumption in the national statistics would also be too low. Note that we assume that VAT is not paid on food in rural areas – this seems reasonable, but perhaps it is too restrictive.

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