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Distortionary company car taxation: deadweight losses through increased car ownership

Listed author(s):
  • Jos Ommeren

    ()

  • Eva Gutiérrez-i-Puigarnau

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

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File URL: http://hdl.handle.net/10.1007/s00181-012-0659-0
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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 45 (2013)
Issue (Month): 3 (December)
Pages: 1189-1204

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Handle: RePEc:spr:empeco:v:45:y:2013:i:3:p:1189-1204
DOI: 10.1007/s00181-012-0659-0
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/econometrics/journal/181/PS2

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  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.
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  4. 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.
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