Stick or Carrot? Asymmetric Responses to Vehicle Registration Taxes in Norway

Car registration taxes across EU countries, MNEs’ profitability, and the role of market concentration

“…We use the OECD Tax database and OECD (2020) to collect the data on value added tax rates for the seventeen countries over the period 2011-2019. 25 From the data, we observe that VAT remains constant across the nine-year period in nine out of seventeen countries in our sample, i.e., in Austria, Belgium, Bulgaria, Estonia, Germany, Poland, Portugal, Slovakia, Sweden. For the rest of the countries, small changes (mostly only once) occur between 2011 and 2019.…”

“…The stream of the literature on motor vehicle taxation has been mainly focused on the role of national fiscal policies, i.e., of different types of taxes (including vehicle registration tax), on the reduction of CO2 emissions from road transport, and on the de-carbonization of newly sold passenger cars (e.g. Ryan Ciccone and Soldani (2019) focus on the impact of vehicle registration tax reforms in Norway on CO2 intensity and on new vehicles' sales. We focus on car registration taxes charged across seventeen European Union member states and look at whether increases in such taxes would affect foreign-owned subsidiaries' profitability as an implication of their car price increases or decreases effect.…”

“…Section 4.2., explained more in details the construction of the market concentration measure 25. We consult this database with the European Automobile Manufacturers' Association (ACEA) Tax Guides (2011 -2019), in order to see whether all vehicles are subject to the standard VAT rate as reported in the OECD Tax database.Electronic copy available at: https://ssrn.com/abstract=4038415…”