Tax Revenue Implications of Decarbonising Road Transport

Scenarios for Slovenia

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This report investigates how tax revenue from transport fuels could evolve over time as vehicles rely less on fossil fuels, with a focus on the case study of the Republic of Slovenia. Reducing the reliance on fossil fuels in the transport sector is a welcome development from the perspective of its climate and health impacts and of reduced energy dependence. However, under current settings, reduced fuel use will also lead to a loss of tax revenues, which may put stress on government budgets. Based on simulations for Slovenia, with a 2050 horizon, the report provides an in-depth assessment of the taxation of road transport and investigates how tax policy could adapt to declining fossil fuel use in the long term if the objective is to maintain revenues at current levels while taking fairness and efficiency considerations into account. It finds that gradual tax reforms, with an evolving mix of taxes, shifting from taxes on fuel to taxes on distances driven, can contribute to more sustainable tax policy over the long term.


Tax revenue scenarios in road transport: A conceptual framework

This chapter introduces the conceptual framework used to describe the main characteristics of the taxation of road transport, encompassing the three main tax bases in the sector: energy use, vehicle stock and road use. The chapter also discusses how different tax types contribute to specific aspects of a sustainable tax policy strategy over the long term, taking revenue, fairness and efficiency considerations into account. Finally, the chapter discusses the degree of tax base disaggregation that is relevant to answering strategic questions concerning transport tax policy.


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