t This paper describes a simple and tractable method for identifying equivalence
scales that reflect the value judgements implicit in a tax and transfer system. The approach
depends on two identifying assumptions and a functional description for transfer payments
that can be estimated using common publicly available data sources. We use this approach
to evaluate tax implicit equivalence scales for the tax-transfer systems of 12 European
countries that applied in 2012. Cross-country averages for the tax implicit scales generate
a surprising set of stylised results: at low incomes, each additional household member
increases the tax implicit scale by approximately 0.5, relative to 1.0 for the first adult; at
high incomes, the average tax implicit scales describe variation that is remarkably similar
to the modified OECD scale. However, substantial cross-country variation underlies these
average scales, suggesting important differences in value judgements implicit in the respective
tax-transfer systems; differences that can otherwise be difficult to discern when systems
are complex and opaque

• Identifying tax implicit equivalence scales