Commuting, the labour market and the tax treatment of company cars in a model of optimal congestion taxes
The aim of this paper is twofold. First, we theoretically study the optimal tax structure of wages, congested transport, and the tax imputed value of company cars. It is assumed that company cars will be used for commuting purposes, as is common in Europe. The government is assumed to maximize social welfare subject to a financing constraint. We derive several optimal second-best tax rules that depend on the tax instruments assumed to be available. What is the optimal wage and fringe benefit tax structure if for technical or political reasons congestion taxes are not feasible? Similarly, how do optimal congestion taxes depend on the taxation of company cars and vice versa? Second, we construct a numerical version of the theoretical model, calibrate it to Belgian data and use it to illustrate the importance of the theoretical results. We show that models that have ignored the favourable tax treatment of company cars have underestimated optimal congestion tolls. At current congestion taxes, we show that, contrary to current practice, the taxable basis of company cars should be set higher than the net cost for the employer. It is furthermore shown that the extent to which taxes on company cars should be raised above their first-best level, depends on the demand for public transportation by employees without company cars.
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Authors:
- De Borger, B
- Wuyts, B
- Conference:
- Publication Date: 2009-6
Language
- English
Media Info
- Pagination: 58p
Subject/Index Terms
- TRT Terms: Congestion pricing; Economics; Mathematical models; Taxes; Taxicabs; Travel demand management; Vehicle fleets
- ATRI Terms: Company car; Congestion pricing; Modelling; Tax; Transport demand; Transport economics
- Subject Areas: Economics; Public Transportation;
Filing Info
- Accession Number: 01384441
- Record Type: Publication
- Source Agency: ARRB
- Files: ATRI
- Created Date: Aug 22 2012 4:35PM