Stefaan Proost (KU Leuven) : “Acceptability of distance taxes”

ROOM : P02

This paper analyses the acceptability of a road tax reform where fuel taxes are replaced by distance-based taxes. This will be necessary as in most countries fossil fueled cars become more fuel efficient and are gradually replaced by electric cars that pay no fuel taxes. Efficient distance tax are best differentiated along three dimensions: level of congestion, urban vs rural and type of fuel. Important tax reforms can only be acceptable if a large majority of the population gains in the reform. This paper analyzes the experience with tax reforms that addressed congestion, the urban-rural differentiation, and the fuel differentiation. When did they succeed and failed and how to make them acceptable. As the car stock is gradually decarbonizing, also the optimal timing of the reform is discussed. The paper concludes with a proposal for the EU that meets the acceptability criterion.