In this paper we study the taxation of car ownership, car use and public transport in the presence of externalities within the framework of a discrete/continuous choice model. We first derive optimal taxes in a simplified setting, emphasizing the specific role of fixed car ownership taxes and the relevance of public transport demand by non-car owners for the optimal tax structure. A numerical optimisation model is then constructed to study welfareoptimal public transport fares and two-part tariffs on ownership and use of gasoline and diesel cars in Belgium. Results are as follows. First, we find that the current differences in tax treatment between diesel and gasoline car ownership and use cannot be justified on the basis of external cost and budgetary considerations. Efficient pricing requires substantial increases in the relative user tax on diesel cars as compared to gasoline cars; optimal fixed taxes are substantially below current levels and only marginally differ between car fuel types. Second, if for political or technical reasons variable car taxes cannot be optimally adjusted, large differences in fixed car taxes do result. The same holds if the government uses kilometre taxes as the main variable tax instrument. Third, the results of a series of marginal tax reform exercises suggest that a shift form gasoline towards diesel taxation is welfare improving, both for fixed and variable taxes. Somewhat surprisingly, a shift from fixed towards variable taxes is not necessarily welfare-improving: it is for diesel, but not for gasoline cars.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Verhoef Erik T., 1997.
"Externalities,"
Serie Research Memoranda
0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
[Downloadable!]
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Did you know? All full texts are decentralized with the publishers, none reside on this server, thus making it possible to offer this service for free to all parties.