The Elgar Guide to Tax Systems

The Elgar Guide to Tax Systems

Elgar original reference

Edited by Emilio Albi and Jorge Martinez-Vazquez

Tax systems have changed considerably in the past three decades. These fundamental changes have been the result of economic globalization, new political stances, and also of developments in public finance thought. The chapters in this volume offer a critical review of those changes from the perspectives of tax theory, policy and tax administration practice, and the political economy of taxation. The authors also consider what sort of reforms are worth undertaking in tax policy design, tax administration and enforcement, and the assignment of sub-national taxes.

Chapter 7: The Economics of Excise Taxation

Sijbren Cnossen

Subjects: economics and finance, public finance, law - academic, tax law and fiscal policy, politics and public policy, public policy


Sijbren Cnossen 1 INTRODUCTION Excise duties used to be called the orphans of tax policy, because they received relatively little attention in the tax literature. This has changed greatly in recent years, due to growing awareness of the detrimental health effects of smoking and excessive drinking, as well as the social costs associated with the phenomenal increase in traffic. Perhaps more importantly, the environmental problems caused by the burning of fossil fuels have led to a burgeoning literature on the use of ‘corrective’ excises to restrain harmful emissions. Attention has also been given to the use of higher-than-average taxes on goods and services regarded as items of luxury consumption in order to enhance the progressivity of the overall tax burden distribution. As implied by these examples, excise systems can be defined to comprise all selective taxes or duties, related levies, and charges on tobacco, alcohol, gambling, petroleum products, motor vehicles, and other specific goods, services, and activities.1 Broadly speaking, the distinguishing features of excise taxation are selectivity in coverage, discrimination in intent, and often some form of quantitative measurement in determining the tax liability, along with the application of specific rates and physical controls over production for enforcement purposes. This contrasts with general consumption taxes, such as value-added taxes (VATs) – sometimes referred to as goods and services taxes (GSTs) – whose bases are typically defined to include all goods and services (hereinafter called commodities) other than those specifically exempted. VATs, moreover, are levied primarily to raise revenue, while their liability (determined...

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