Distortionary Company Car Taxation: Deadweight Losses Through Increased Car Ownership

Abstract:     
We analyze the effects of distortionary company car taxation through increased household car ownership for the Netherlands. We use several identification strategies and demonstrate that for about 20 percent of households company car possession increases car ownership. The annual welfare loss of distortionary company taxation through increased car ownership is generally rather small, maximally €120 per company car, and likely much less. However, for policies that exempt households from paying tax on their company car, the annual deadweight loss is likely higher.

Number of Pages in PDF File: 25

Keywords: fringe benefits, taxation, company car

JEL Classification: D12, D61, J33, R41, R48

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