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The Diverse Structures of Passenger Car Taxation in Europe and the EU Commissions Proposal for Reform

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  • Uwe Kunert
  • Hartmut Kuhfeld
Abstract
In this study we first analyze duties on passenger cars in 27 European countries. Taxes and fees related to the registration, ownership and use of cars are assessed differently across Europe, and their rates vary significantly. We find that the annual taxes levied on specific types of cars differ across countries by a factor of up to four, while the various kinds of duties levied account for extremely diverse shares of the entire car-related tax burden and give rise to very different ratios of fixed and variable components in the taxes levied. Given the importance of taxation systems for market and competitive conditions, the Euro-pean Commission is seeking to achieve reciprocal alignment of the various systems. The Commission has also proposed that greater importance be given to environmental criteria in the assessment of vehicle related taxes. Effectively in some countries, the registration taxes represent a significant burden on the acquisition of new vehicles; this factor reduces market transparency and may mean that taxes are levied twice. Only in a few countries' tax schemes is fuel consumption taken into account, and then only to a marginal degree. It is thus neces-sary to modify and simplify the tax systems in Europe, because it is crucial that the traffic sector contribute more to climate protection, and because motor vehicles impair local air quality. In this context, the overall structure of the various charges to passenger cars should be rebalanced, with CO2 emissions not being the sole focus.

Suggested Citation

  • Uwe Kunert & Hartmut Kuhfeld, 2006. "The Diverse Structures of Passenger Car Taxation in Europe and the EU Commissions Proposal for Reform," Discussion Papers of DIW Berlin 589, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp589
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    References listed on IDEAS

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    1. Yasser Ammar AL-Rawi & Mohammed Harith Imlus & Yusri Yusup & Sofri Bin Yahya, 2018. "The Optimal Progressive Tax Policy to Reduced Vehicles Externalities," Journal of Asian Scientific Research, Asian Economic and Social Society, vol. 8(8), pages 265-276, August.
    2. Hennessy, Hugh & Tol, Richard S.J., 2011. "The impact of tax reform on new car purchases in Ireland," Energy Policy, Elsevier, vol. 39(11), pages 7059-7067.
    3. Fu, Miao & Andrew Kelly, J., 2012. "Carbon related taxation policies for road transport: Efficacy of ownership and usage taxes, and the role of public transport and motorist cost perception on policy outcomes," Transport Policy, Elsevier, vol. 22(C), pages 57-69.
    4. 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.
    5. Barros, Victor & Cruz, Carlos Oliveira & Júdice, Tomás & Sarmento, Joaquim Miranda, 2021. "Is taxation being effectively used to promote public transport in Europe?," Transport Policy, Elsevier, vol. 114(C), pages 215-224.
    6. Fridstrøm, Lasse & Østli, Vegard, 2017. "The vehicle purchase tax as a climate policy instrument," Transportation Research Part A: Policy and Practice, Elsevier, vol. 96(C), pages 168-189.
    7. Francis Ostermeijer & Hans R A Koster & Jos van Ommeren & Victor Mayland Nielsen, 2022. "Automobiles and urban density [Urban spatial structure]," Journal of Economic Geography, Oxford University Press, vol. 22(5), pages 1073-1095.
    8. Montag, Josef, 2015. "The simple economics of motor vehicle pollution: A case for fuel tax," Energy Policy, Elsevier, vol. 85(C), pages 138-149.
    9. Adamos Adamou & Sofronis Clerides & Theodoros Zachariadis, 2012. "Assessment of CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece," University of Cyprus Working Papers in Economics 04-2012, University of Cyprus Department of Economics.
    10. Santos, Georgina & Behrendt, Hannah & Maconi, Laura & Shirvani, Tara & Teytelboym, Alexander, 2010. "Part I: Externalities and economic policies in road transport," Research in Transportation Economics, Elsevier, vol. 28(1), pages 2-45.
    11. Adamos Adamou & Sofronis Clerides & Theodoros Zachariadis, 2012. "Trade-offs in CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece," Working Paper series 33_12, Rimini Centre for Economic Analysis.
    12. Shafiei, Ehsan & Davidsdottir, Brynhildur & Fazeli, Reza & Leaver, Jonathan & Stefansson, Hlynur & Asgeirsson, Eyjolfur Ingi, 2018. "Macroeconomic effects of fiscal incentives to promote electric vehicles in Iceland: Implications for government and consumer costs," Energy Policy, Elsevier, vol. 114(C), pages 431-443.
    13. Wells, Peter & Varma, Adarsh & Newman, Dan & Kay, Duncan & Gibson, Gena & Beevor, Jamie & Skinner, Ian, 2013. "Governmental regulation impact on producers and consumers: A longitudinal analysis of the European automotive market," Transportation Research Part A: Policy and Practice, Elsevier, vol. 47(C), pages 28-41.
    14. Karst Geurs & Henk Meurs, 2011. "The Dutch national road pricing scheme: review of appraisal studies and impacts for the Dutch car market and the environment," ERSA conference papers ersa10p1438, European Regional Science Association.
    15. Laurence Turcksin & Olivier Mairesse & Cathy Macharis & Joeri Van Mierlo, 2013. "Encouraging Environmentally Friendlier Cars via Fiscal Measures: General Methodology and Application to Belgium," Energies, MDPI, vol. 6(1), pages 1-21, January.
    16. Aileen Lam, 2013. "Projections of future emissions and energy use from passenger cars as a result of policies in the EU with a dynamic model of technological change," 4CMR Working Paper Series 005, University of Cambridge, Department of Land Economy, Cambridge Centre for Climate Change Mitigation Research.
    17. Lesia Hrytsyna & Olena Kharun & Margaryta Dzuba, 2019. "Comparative Analysis Of The Customs Regulation Of Vehicle Import In The G20 Countries," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 5(1).
    18. Timilsina, Govinda R. & Dulal, Hari B., 2008. "Fiscal policy instruments for reducing congestion and atmospheric emissions in the transport sector : a review," Policy Research Working Paper Series 4652, The World Bank.

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