Missing Miles: Evasion Responses to Car Taxes
VATT Institute for Economic Research Working Papers 123
54 Pages Posted: 30 Oct 2019
Date Written: October 3, 2019
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: Suggested Citation