Tax incidence in the fuel market: Evidence from station-level data

This paper examines heterogeneity in the pass-through of a substantial diesel tax increase in Finland using station- and daily-level microdata. The estimated average pass-through rate is approximately 80% of the nominal tax increase. The pass-through rates differ across income groups, ranging from 9...

Full description

Saved in:
Bibliographic Details
Published in:Proceedings (Conference on Taxation) 2019-01, Vol.112, p.1-55
Main Authors: Harju, Jarkko, Kosonen, Tuomas, Laukkanen, Marita, Palanne, Kimmo
Format: Article
Language:English
Subjects:
Market Response to Environmental Polices
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper examines heterogeneity in the pass-through of a substantial diesel tax increase in Finland using station- and daily-level microdata. The estimated average pass-through rate is approximately 80% of the nominal tax increase. The pass-through rates differ across income groups, ranging from 90% in the lowest income septile to 76% in the highest income septile. These results suggest that fuel taxes are regressive. We also find evidence that the pass-through rate is larger in the most sparsely populated rural areas than in the most urban areas. Finally, we find evidence that the supply side anticipated the reform and filled up storage diesel tanks in the last months preceding the large diesel tax increase.
ISSN:1549-7542
2377-5661