If taxes are set on import prices, producers can have a strong incentive to set up a sister company to import cars. The sister company can then have higher profit margins, which are nevertheless taxed at a lower rate then imported cars. This pricing strategy explains at least part of the change in pre-tax car price differentials over time.
The Finnish car tax reform clearly illustrates the errors that are induced when using tax receipts (in relation to some scale variable such as the GDP) as an indicator of the severity of taxation. If taxes are simply too high, preventing sales, one may misleadingly interpret this as an indication of the lightness of taxation, even if the opposite is true.
Finnish petrol, electricity and car markets surely have some special characteristics that have to be kept in mind when interpreting the final results. In particular, the level of competition differs considerably
Viestiä on viimeksi muokattu 07.08.2013.