There is no single formal definition of what constitutes an indirect tax. However, in common use it usually means those taxes that are levied on the sale of goods and services, and that are generally collected and remitted by the vendor of those goods and services, rather than the purchaser. Examples of such taxes include excise duties, sales taxes, value added taxes (vat), and import or export duties.

This chapter of the Handbook of Microsimulation Modelling looks at the issues involved in building and using microsimulation models for the analysis of indirect taxes and consumption. It starts by introducing the academic and policy questions which indirect tax micro‑simulation models can help answer. In doing this, it highlights the importance of indirect taxes to overall government revenue, and discusses a number of recent reforms to these systems to demonstrate the continuing practical need for such models. It then sets out the methodological issues and choices involved in building these models: the types of spending and taxes to cover; the type of behavioural response to taxes to model; the assessment of the distributional impact of tax systems and tax reforms; and the data required for different types of models. To provide some concrete examples, two models are discussed in some detail, focusing on the methodological choices made in constructing them, and the uses to which they have been put and can be used for. Finally, it looks to possible future developments in indirect tax micro‑simulation methodology.