Welfare Effects of Distortionary Company Car Taxation

In Europe, company cars are offered by employers as fringe benefits to their employees at a lower price than employees pay in the car market, mainly due to favourable taxation of company cars. We analyse the welfare effects of favourable taxation of company cars for the Netherlands. The estimated annual welfare costs of the distortionary taxation of company cars are estimated to be at least €2,000 per company car. For the whole of Europe, these welfare costs are estimated to be at least €40 billion per year.This discussion has resulted in a publication in 'International Economic Review'.