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Analysis and quantification of a new fiscally neutral European tax

Author

Listed:
  • Mikuláš Luptáčik

    (University of Economics in Bratislava)

  • Peter Luptáčik

    (Industriewissenschaftliches Institut Wien)

Abstract

The present study contributes to the discussion on the new European tax or excise which would be based on taxing end consumption (taxing the products and not the production) according to how much CO2 is emitted during the production of particular commodities, irrespective of whether all or a part of this process takes place inside or outside the EU. The analysis is based on the input–output model, which provides an appropriate and unique approach for measuring the total CO2 content of the various commodities taking the entire production chain into account. The calculation by products can be the basis for the estimation of product specific CO2 taxes. The model calculations based on the input–output table for the EU-27 for the year 2011 leads to the tax rate of 40.69 euros per tonne of CO2 emissions, which could have generated fiscal revenue in the amount of 1% of EU GDP. In line with the principle of fiscal neutrality, a reduction of the labour costs by −2.03% could compensate the introduction of a CO2 tax by the amount of 40.69 euros per tonne of CO2. The cost push effects lead to change of relative prices in favour of environmentally produced goods and services.

Suggested Citation

  • Mikuláš Luptáčik & Peter Luptáčik, 2017. "Analysis and quantification of a new fiscally neutral European tax," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(4), pages 635-663, November.
  • Handle: RePEc:kap:empiri:v:44:y:2017:i:4:d:10.1007_s10663-017-9384-4
    DOI: 10.1007/s10663-017-9384-4
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    References listed on IDEAS

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    More about this item

    Keywords

    EU own resource; CO2 tax; Entire production chain; Input–output-modelling; Compensation mechanism;
    All these keywords.

    JEL classification:

    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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