IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_1221.html
   My bibliography  Save this paper

Tax Competition under Minimum Rates: The Case of European Diesel Excises

Author

Listed:
  • Michiel Evers
  • Herman R. J. Vollebergh
  • Ruud A. de Mooij

Abstract

This paper estimates Nash-type fiscal reaction functions for European governments competing for revenue from diesel excises. It appears that European governments strategically set their excise levels by responding to their neighbors’ tax rates. This provides evidence for the presence of tax competition in diesel excises. In fact, a 10 percent higher rate in neighboring countries (in terms of the user price) induces a country to raise its own rate by between 2 and 3 percent. This impact is robust for alternative specifications. By imposing restrictions on excise levels, EU harmonization of excises in 1987 and the introduction of a minimum in 1992 exerted a positive impact on the excise level in a number of EU countries. It has not, however, significantly reduced the intensity of tax competition. Indeed, strategic tax responses have not significantly been reduced by these harmonization policies. We also find that high-tax countries appear to compete more aggressively than low-tax countries in the sense that they feature larger strategic tax responses. There is no significant difference between large and small countries.

Suggested Citation

  • Michiel Evers & Herman R. J. Vollebergh & Ruud A. de Mooij, 2004. "Tax Competition under Minimum Rates: The Case of European Diesel Excises," CESifo Working Paper Series 1221, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1221
    as

    Download full text from publisher

    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1221.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. de Mooij, Ruud A & Ederveen, Sjef, 2003. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(6), pages 673-693, November.
    2. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 269-304, June.
    3. Devereux, Michael P. & Lockwood, Ben & Redoano, Michela, 2008. "Do countries compete over corporate tax rates?," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1210-1235, June.
    4. Levinson, Arik, 2003. "Environmental Regulatory Competition: A Status Report and Some New Evidence," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(1), pages 91-106, March.
    5. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
    6. Rosanne Altshuler & Timothy J. Goodspeed, 2015. "Follow the Leader? Evidence on European and US Tax Competition," Public Finance Review, , vol. 43(4), pages 485-504, July.
    7. Cnossen,Sijbren, 2002. "Tax policy in the european union, A review of issues and options," Research Memorandum 023, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    8. Devereux, M.P. & Lockwood, B. & Redoano, M., 2007. "Horizontal and vertical indirect tax competition: Theory and some evidence from the USA," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 451-479, April.
    9. Zodrow, George R, 2003. "Tax Competition and Tax Coordination in the European Union," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(6), pages 651-671, November.
    10. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-892, September.
    11. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
    12. Sijbren Cnossen, 2002. "Tax Policy in the European Union: A Review of Issues and Options," CESifo Working Paper Series 758, CESifo Group Munich.
    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. DE BORGER, Bruno & MAYERES, Inge, "undated". "Taxation of car-ownership, car use and public transport: Insight derived from a discrete choice numerical optimisation model," Working Papers 2004021, University of Antwerp, Faculty of Applied Economics.
    2. Ian Parry & Herman R. J. Vollebergh, 2016. "Reforming the EU Energy Tax Directive: Assessing the Options," CESifo Working Paper Series 5749, CESifo Group Munich.
    3. Mandell, Svante & Proost, Stef, 2016. "Why truck distance taxes are contagious and drive fuel taxes to the bottom," Journal of Urban Economics, Elsevier, vol. 93(C), pages 1-17.
    4. Charles McLure, 2009. "Taxing commercial motor fuel in the European Union: the case for an apportionment-based, destination-principle system," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(3), pages 395-414, June.
    5. Michael Keen & Ian Parry & Jon Strand, 2013. "Planes, ships and taxes: charging for international aviation and maritime emissions," Economic Policy, CEPR;CES;MSH, vol. 28(76), pages 701-749, October.
    6. Axel Dreher & Tim Krieger, 2004. "Do gasoline prices converge in a unified Europe with non- harmonized tax rates?," International Finance 0411005, EconWPA.
    7. László Paizs, 2013. "Asymmetric competition in the setting of diesel excise taxes in EU countries," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 63(4), pages 423-450, December.
    8. Axel Dreher & Tim Krieger, 2010. "Diesel price convergence and mineral oil taxation in Europe," Applied Economics, Taylor & Francis Journals, vol. 42(15), pages 1955-1961.
    9. Federico Revelli, 2005. "On Spatial Public Finance Empirics," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 475-492, August.
    10. Richard M. Bird, 2004. "Getting it Right: Financing Urban Development in China," International Tax Program Papers 0413, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised Nov 2004.
    11. Suphi Sen & Herman R. J. Vollebergh, 2016. "The Effectiveness of Taxing Carbon Content of Energy Consumption," CESifo Working Paper Series 6003, CESifo Group Munich.
    12. Michael Keen & Jon Strand, 2007. "Indirect Taxes on International Aviation," Fiscal Studies, Institute for Fiscal Studies, vol. 28(1), pages 1-41, March.
    13. Paizs, László, 2009. "Gázolaj-jövedékiadó verseny az Európai Unióban
      [Fiscal competition on the market for diesel fuel in the European Union]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 216-238.
    14. Jan Jacobs & Jenny Ligthart & Hendrik Vrijburg, 2010. "Consumption tax competition among governments: Evidence from the United States," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(3), pages 271-294, June.

    More about this item

    Keywords

    Diesel excise; strategic tax setting; minimum rates; European Union;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ces:ceswps:_1221. 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: (Klaus Wohlrabe). General contact details of provider: http://edirc.repec.org/data/cesifde.html .

    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.