for which VAT rates are defined.<sup>10</sup> Note that as in most household surveys, total consumption of households in HBS using the weights provided by GUS amount to 49 percent of total household consumption reported in National Accounts. Since we do not make assumptions about informality, the amount of VAT calculated using the HBS constitutes 67 percent of total tax collections paid by the households. For excise taxes, we apply statutory rates to consumption of alcohol, tobacco, fuel and automobiles (net of VAT) identified in the HBS to estimate the direct burden of these excises on households. However, since fuel is an important intermediate product we use a costpush model and the 2010 input-output matrix to estimate second round effects of excises on fuel to all other products in the economy.

On the spending side, the HBS provides detailed information on who received payment from contributory and non-contributory social protection programs. Family Allowance, Social Assistance, Nursing Allowance, Nursing Benefit, and Housing Benefit are directly identified in the survey and since they are not taxable, the reported net value can be directly used.

The approach to estimate the incidence of public spending on education followed here is the socalled “benefit or expenditure incidence” or the “government cost” approach. In essence, we calculate per beneficiary input costs by level of education from government spending at the voivodship level and the number of pupils in each level and voivodship. This approach is also known as the “classic” or “non-behavioral approach”, and it amounts to asking the following question: how much would the income of a household have to be increased if it had to pay for the free or subsidized public service at the full cost to the government? Since the HBS does not provide information on educational enrolment by public versus private institutions, we identify children going to public schools based on household expenditures on tuition, and assign a lower public benefit to those households based on the standard subsidy amount per student in private institution (75 percent for those in private kindergartens, and 50 percent in other school types). For university students we calculate the share of public university subsidy per stationary student and assign this amount to students assumed to be attending public universities based on HBS data.

Finally, for health we use the cost of insurance approach and assign a per capita benefit to all individuals. However, some households opt out of public service and pay for private insurance to cover primary care, dental services, outpatient care, and rehabilitation, as identified in the HBS. For these households, we reduce the public benefit amount accordingly.

There are some important caveats about what the fiscal incidence analysis applied here does not address. First, it does not take into account behavioral, lifecycle or general equilibrium effects and focuses on average incidence rather than incidence at the margin. Our tax shifting and labor supply responses assumptions are strong because they imply that that consumers have perfectly inelastic

> 10 Note that we do not apply statutory VAT or excise rates to expenditures related to farming activities as we treat those as intermediate products.

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