Vehicle ownership and usage charges

Subhashini Muthukrishnan

Transport Policy, 2010, vol. 17, issue 6, 398-408

Abstract: We present a simple model to study the welfare effects of a shift from ownership to usage taxes for cars. We consider a model in which a single representative consumer derives utility from consuming two goods--consumption of motor vehicle kilometers, and an aggregate consumption good treated as numeraire. We characterize the optimal consumption of car kilometers by a representative car user and find that a shift from ownership towards usage taxes is not necessarily welfare-improving: while a revenue-neutral shift makes the representative car user worse off; a utility-neutral shift leads to a significant loss of revenue to the government. An empirical analysis based on Singapore data is also consistent with our theoretical results.

Keywords: Transport; externalities; Fixed; tax; Usage; tax; Variabilization; Consumer; welfare; Revenue; loss (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (6)

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