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Motor Vehicle Registration Taxes (MVRT) across EU countries: MNEs’ profitability and the role of market concentration

Author

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  • Pranvera Shehaj

    (WU Vienna University of Economics and Business)

  • Martin Zagler

    (WU Vienna University of Economics and Business
    UPO University of Eastern Piedmont)

Abstract

This paper discusses the effects of one-off Motor Vehicle Registration Taxes (MVRT) and market concentration level on the profitability of multinational enterprises (MNEs) operating in the European Union motor vehicle industry. Our simple theoretical framework shows that firm profits depend on the demand function and therefore on taxes applied to prices. We overcome empirically the challenges of making informative theoretical predictions on the pass-through rate under imperfect competition. We find that MVRT,—both as ad valorem taxes and as specific taxes,—have a significant negative effect on MNEs’ profitability. Our findings show a statistically significant positive effect of market concentration on profitability. Finally, our results suggest that the degree of competitiveness in the motor vehicle market moderates the effect of MVRT on firm profitability only in EU countries where the MVRT is an ad valorem tax, with the negative effect of the ad valorem MVRT becoming higher as the motor vehicle market becomes less competitive.

Suggested Citation

  • Pranvera Shehaj & Martin Zagler, 2023. "Motor Vehicle Registration Taxes (MVRT) across EU countries: MNEs’ profitability and the role of market concentration," European Journal of Law and Economics, Springer, vol. 56(1), pages 155-198, August.
    • Handle: RePEc:kap:ejlwec:v:56:y:2023:i:1:d:10.1007_s10657-023-09775-8
    DOI: 10.1007/s10657-023-09775-8
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    More about this item

    Keywords

    Motor Vehicle Registration Tax (MVRT); Market concentration; Tax incidence; Profitability; Multinational enterprises; EU motor vehicle industry;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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