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WP202322-targeting-taxes-on-local-externalities.pdf
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We consider optimal anonymous consumption taxes in situations where the magnitude of an externality varies with individuals who cause it. For instance, urban fuel consumers generate greater pollution damages compared to rural consumers, but both groups are subjected to the same fuel tax. We provide a condition for the validity of the targeting principle, where external concerns are only addressed through the tax imposed on the commodity responsible for the externality. When this condition holds, one can separate the equity/efficiency and environmental components of this tax. An illustration suggests that Pigovian considerations would explain most of the fuel tax in France.
Authors
Research Associate University of Paris 1 Pantheon-Sorbonne and Paris School of Economics
Stéphane is a Research Associate at our Institute and a Professor of Economics at University of Paris 1 Panthéon-Sorbonne.
Researcher/Professor Paris School of Economics
Working Paper details
- DOI
- 10.1920/wp.ifs.2023.2223
- Publisher
- Institute for Fiscal Studies
Suggested citation
Gauthier, S and Henriet, F. (2023). Targeting taxes on local externalities. 23/22. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/targeting-taxes-local-externalities (accessed: 27 April 2024).
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