Missing Miles: Evasion Responses to Car Taxes

VATT Institute for Economic Research Working Papers 123

54 Pages Posted: 30 Oct 2019

See all articles by Jarkko Harju

Jarkko Harju

Government of the Republic of Finland - VATT Institute for Economic Research; CESifo (Center for Economic Studies and Ifo Institute)

Tuomas Kosonen

University of Helsinki - Department of Political and Economic Studies

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Date Written: October 3, 2019

Abstract

We study a tax evasion response to car taxes in Finland, where used car importers overstate the mileage to reduce tax liability. First, we develop a tax evasion measure by comparing reported mileage upon import with subsequent information from vehicle inspections, and find that a decline in mileage — "missing miles" — occurs frequently. Second, we analyze a tax rate increase, and observe a reduction in the number of imported used cars, but only among non-evaders. Finally, we analyze an RCT informing some potential importers about a program of inspections that uncover true odometer readings, and the results suggest that third-party reporting reduces evasion.

Keywords: car tax, tax evasion, enforcement measures

JEL Classification: H21, H23, H26, C93

Suggested Citation

Harju, Jarkko and Kosonen, Tuomas and Slemrod, Joel B., Missing Miles: Evasion Responses to Car Taxes (October 3, 2019). VATT Institute for Economic Research Working Papers 123, Available at SSRN: https://ssrn.com/abstract=3467516 or http://dx.doi.org/10.2139/ssrn.3467516

Jarkko Harju (Contact Author)

Government of the Republic of Finland - VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Tuomas Kosonen

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

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Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

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United States

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