Motor fuels tax evasion is a persistent drain on state resources earmarked for public transportation systems. This study discusses fuel tax evasion issues in the context of the Kentucky Road Fund in comparison to peer states in the southern region. The prevalent methods of fuel tax fraud are identified and described. A basic model for estimating revenue loss from fuel tax evasion is also demonstrated for the Commonwealth of Kentucky. The model estimates that as much as $16 million in motor fuels tax revenue was evaded in 1998. The estimates of evasion are also discussed in the context of a proposed 10-cent tax hike on both gasoline and diesel fuels. Conservative estimates suggest that this tax change may increase fuel tax evasion by 38%, or an additional $6 million in lost revenues. The authors' findings serve to remind policymakers and administrators that enforcement efforts need to be stepped up when incentives to evade are altered. (A)
Samenvatting