IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v45y2013i3p1189-1204.html
   My bibliography  Save this article

Distortionary company car taxation: deadweight losses through increased car ownership

Author

Listed:
  • Jos Ommeren

    ()

  • Eva Gutiérrez-i-Puigarnau

Abstract

We analyse the effects of distortionary company car taxation through increased household car consumption for the Netherlands. We use several identification strategies and demonstrate that for about 20 % of households company car possession increases car ownership. The annual welfare loss of distortionary company taxation through increased car ownership is generally rather small, maximally €120 per company car, and much less than the welfare loss through increased expenditure on the company car. However, for policies that exempt households from paying tax on their company car, the annual deadweight loss is likely higher. Our first-best tax policy recommendation is to increase company car tax rates. However, our current results suggest that a second-best policy, which keeps average company car taxation constant but which reduces the marginal tax on cheaper cars and increases the marginal tax on expensive cars, would be welfare improving as overconsumption of company cars will be reduced. Copyright Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Jos Ommeren & Eva Gutiérrez-i-Puigarnau, 2013. "Distortionary company car taxation: deadweight losses through increased car ownership," Empirical Economics, Springer, vol. 45(3), pages 1189-1204, December.
  • Handle: RePEc:spr:empeco:v:45:y:2013:i:3:p:1189-1204
    DOI: 10.1007/s00181-012-0659-0
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00181-012-0659-0
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Taede Tillema & Bert van Wee & Jan Rouwendal & Jos van Ommeren, 2008. "Firms: Changes in Trip Patterns, Production Prices, Locations and in the Human Resource Policy due to Road Pricing," Chapters,in: Pricing in Road Transport, chapter 6 Edward Elgar Publishing.
    2. repec:dgr:uvatin:20070060 is not listed on IDEAS
    3. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-130, January.
    4. Zax, Jeffrey S., 1988. "Fringe benefits, income tax exemptions, and implicit subsides," Journal of Public Economics, Elsevier, vol. 37(2), pages 171-183, November.
    5. Antonio M. Bento & Lawrence H. Goulder & Mark R. Jacobsen & Roger H. von Haefen, 2009. "Distributional and Efficiency Impacts of Increased US Gasoline Taxes," American Economic Review, American Economic Association, vol. 99(3), pages 667-699, June.
    6. Brons, Martijn & Nijkamp, Peter & Pels, Eric & Rietveld, Piet, 2008. "A meta-analysis of the price elasticity of gasoline demand. A SUR approach," Energy Economics, Elsevier, vol. 30(5), pages 2105-2122, September.
    7. Mohammad Arzaghi & J. Vernon Henderson, 2008. "Networking off Madison Avenue," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1011-1038.
    8. Craft, Erik D. & Schmidt, Robert M., 2005. "An Analysis of the Effects of Vehicle Property Taxes on Vehicle Demand," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(4), pages 697-720, December.
    9. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    10. Eva Gutiérrez‐i‐Puigarnau & Jos N. Van Ommeren, 2011. "Welfare Effects Of Distortionary Fringe Benefits Taxation: The Case Of Employer‐Provided Cars," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(4), pages 1105-1122, November.
    11. M. Kumar & K. V. Krishna Rao, 2006. "A Stated Preference Study for a Car Ownership Model in the Context of Developing Countries," Transportation Planning and Technology, Taylor & Francis Journals, vol. 29(5), pages 409-425, July.
    12. Palma, André de & Lindsey, Robin & Proost, Stef, 2006. "Research challenges in modelling urban road pricing: An overview," Transport Policy, Elsevier, vol. 13(2), pages 97-105, March.
    13. De Borger, Bruno & Wuyts, Bart, 2011. "The tax treatment of company cars, commuting and optimal congestion taxes," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1527-1544.
    14. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    15. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
    16. Dargay, Joyce & Gately, Dermot, 1999. "Income's effect on car and vehicle ownership, worldwide: 1960-2015," Transportation Research Part A: Policy and Practice, Elsevier, vol. 33(2), pages 101-138, February.
    17. repec:ucp:bkecon:9781884829987 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dimitropoulos, Alexandros & van Ommeren, Jos N. & Koster, Paul & Rietveld, Piet, 2016. "Not fully charged: Welfare effects of tax incentives for employer-provided electric cars," Journal of Environmental Economics and Management, Elsevier, vol. 78(C), pages 1-19.
    2. Voßmerbäumer, Jan & Wagner, Franz W., 2013. "Steuerwirkungen betrieblicher Entgeltpolitik," arqus Discussion Papers in Quantitative Tax Research 144, arqus - Arbeitskreis Quantitative Steuerlehre.
    3. Chaloupka, Christine & Kölbl, Robert & Loibl, Wolfgang & Molitor, Romain & Nentwich, Michael & Peer, Stefanie & Risser, Ralf & Sammer, Gerd & Schützhofer, Bettina & Seibt, Claus, 2015. "Nachhaltige Mobilität aus sozioökonomischer Perspektive – Diskussionspapier der Arbeitsgruppe "Sozioökonomische Aspekte" der ÖAW-Kommission "Nachhaltige Mobilität" (ITA-manu," ITA manu:scripts 15_02, Institute of Technology Assessment (ITA).
    4. Alexandros Dimitropoulos & Jos N. van Ommeren & Paul Koster & Piet Rietveld†, 2014. "Welfare Effects of Distortionary Tax Incentives under Preference Heterogeneity: An Application to Employer-provided Electric Cars," Tinbergen Institute Discussion Papers 14-064/VIII, Tinbergen Institute.
    5. Nijland, Linda & Dijst, Martin, 2015. "Commuting-related fringe benefits in the Netherlands: Interrelationships and company, employee and location characteristics," Transportation Research Part A: Policy and Practice, Elsevier, vol. 77(C), pages 358-371.

    More about this item

    Keywords

    Fringe benefits; Taxation; Company car; Car ownership; Deadweight loss; D12; D61; J33; R41; R48;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:45:y:2013:i:3:p:1189-1204. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.