Taxes on Cars and Gasoline to Control of Air Pollution: Suggested Models for Bangladesh

The main aim of this paper is to investigate some policies that would influence people to drive fewer miles and to buy smaller cars, use better pollution control equipment, and cleaner fuel. An attempt has been made to quote the vehicle tax rates of Bangladesh. Despite technological advances, the emissions of cars’ still can not be measured reliably enough to impose a Pigovian tax. Literature review reveals that the gas tax depends on fuel type, engine size and pollution control equipment. A vehicle tax depends on mileage or a combination of uniform tax rates on gasoline and engine size with a subsidy to pollution control equipment. This study suggested two models, which first considers homogenous consumers and then considers for heterogeneous consumers that differ by income and two taste parameters, one for miles and other for vehicle size. Yet Bangladesh has not imposed emission taxes on vehicles properly; as a result the air pollutions in large cities are increasing dangerously. Dhaka, the capital of Bangladesh, is one of the dangerously polluted cities of the world. The government of Bangladesh should take immediate steps to impose emission taxes on vehicles according to guidelines of this paper to apply the taxes on vehicles.