10 percent of likely LCMS taxpayers (ranked by income) paid the same share – 37.6 percent – of total PAYE taxes collected from all LCMS households that the top 10 percent of actual taxpayers paid in confirmed PAYE collections from all Zambian households. Likewise, the bottom 10 percent of likely LCMS taxpayers paid the same 0.9 percent share of total PAYE taxes collected from all LCMS households that the bottom 10 percent taxpayers paid in confirmed PAYE collections from all Zambian households. Recreating the confirmed distribution of concentration shares of actual taxpayers in the LCMS increased PAYE’s overall progressivity.

# _Direct Transfers_

The LCMS does not directly identify SCT beneficiary households. Instead, the team simulates SCT eligibility based on household characteristics that inform the actual SCT targeting and selection. The study takes as eligible households those living in regions in which SCT is available and who have 1 (or more) disabled individuals; or have a dependency ratio of 3 or greater; or have a female household head. The team then mixes a poverty-targeted allocation rule with a randomized allocation rule (among eligible households) in each SCT region represented in the LCMS. This “mixed” poverty-targeted (among SCT-eligible) and random allocation (among SCT-eligible) results in a “leakage” rate of approximately 25 percent overall: 25 percent of the available SCT benefits are received by non-poor households.

The number of SCT beneficiaries in 2015 is 166,269. SCT benefit amounts transferred––140 Zambian Kwacha per month for households with at least 1 disabled member and 70 Kwacha per month for other households––are simulated according to program rules. Finally, the regional SCT beneficiary quotas are replicated within the LCMS so that the number of SCT beneficiaries (and benefits) allocated within the LCMS matches (by region) the actual SCT beneficiaries (and benefits).

# _Farmer Input Support Program (FISP) Subsidies_

FISP delivers subsidized agricultural inputs through authorized resellers (farmer cooperatives). The Agricultural Enterprise Expenses module in the LCMS asks those whose livelihood is in agriculture where they buy inputs. To qualify for FISP support, farmers must belong to a cooperative or farmer association and have the capacity to grow one ha of maize.

LCMS households involved in agricultural production who buy fertilizer at farmer cooperatives are imputed to be FISP recipients. According to the team’s estimations based on the LCMS 2015, approximately 410,000 households received FISP (proxied as those who receive inorganic fertilizer through cooperatives) in the growing season that spanned 2014–2015. This number is close to official government figures. The subsidy value of a FISP purchase is assumed to be a flat 1,800 Kwacha26 (regardless of the amount spent on fertilizers purchased at cooperatives. Thus, total FISP expenditures allocated to LCMS households are equivalent to 1,800 times the total number of households who indicate making fertilizer purchases through cooperatives.

# _Energy subsidies and indirect taxes_

Fuel and electricity subsidies, VAT, and alcohol and tobacco excises are imputed based on household consumption expenditure records. In other words, when households record purchases of energy, goods that are standard-rated under the 2015 VAT schedule, or alcohol or tobacco, the subsidy or indirect tax payment implicit in this purchase is imputed based on the relevant subsidy or tax schedule. For example, if an LCMS household records $110 in alcohol purchases over a month, and the excise rate on alcohol purchases is 10 percent, the household is imputed to have purchased $100 of alcohol and paid $10 in excises.

> 26 This rate is taken from information provided by World Bank Agriculture team colleagues.

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