An important instrument for traffic control could be variabilisation of the motor vehicle tax: raising the costs of car usage and reducing the costs of possession. This study examines the income and distribution effects of three kinds of road use charges: variabilisation of ownership tax, variabilisation of purchase tax (both differentiated to fuel type and weight), and a fixed rate whereby only a part of ownership tax will be variable. The most important factor that determines the income effect for a specific household is the mileage driven. Only when this mileage differs from the average mileage driven, the level of income effect can depend on the fuel type, weight and price of the car. The car age is an important factor for the income effect in case of variabilisation of the purchase tax. Variabilisation of ownership tax leads, on average, to a slight increase in income for the lowest income group and a slight decrease in income for the highest income group. This is because the average household in the lowest income group drives fewer kilometres than average households with high income. The difference in income effect between the highest and lowest income groups is relatively small with variabilisation of purchase tax and a fixed rate. Households with diesel and LPG cars will experience a decrease of income whatever kind of road use charge is implemented. This is because they drive far more kilometres than owners of petrol cars do. The difference in income effect between fuel types is much less with a fixed rate road use charge than with variabilisation of ownership or usage tax. For the covering abstract of the conference see ITRD E206647.
Abstract