Distortionary company car taxation: deadweight losses through increased car ownership

J.N. van Ommeren, E. Gutierrez Puigarnau

Research output: Contribution to JournalArticleAcademicpeer-review

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. © 2012 Springer-Verlag Berlin Heidelberg.
Original languageEnglish
Pages (from-to)1189-1204
JournalEmpirical Economics
Volume45
Issue number3
DOIs
Publication statusPublished - 2013

Fingerprint Dive into the research topics of 'Distortionary company car taxation: deadweight losses through increased car ownership'. Together they form a unique fingerprint.

Cite this