Distributional impact of a regional road pricing scheme in Flanders

Abstract

Abstract This paper uses a combination of a regional computable general equilibrium model(EDIP) and a household micro-simulation model (EUROMOD) to assess the welfare effects of a transport tax reform. The transport tax reform replaces current car fuel and ownership taxes by a road charge differentiated by time and place. This is combined with five realistic tax recycling scenarios that can be ordered by their degree of progressivity. The net revenues are used to reduce taxes on labour. The tax reform leads to modest increases in real wage, disposable income and GDP, while reducing external costs of transport. Using the combination of general equilibrium modelling with micro-simulation we can go into more detail on the distributive impact of the road tax reform. Where other authors have found progressive or mildly regressive impacts of road charging, we find that within each income group there is a wide divergence of positively and negatively affected households. As such, the support or opposition for a road charging policy may depend more on the profile of the car user than on the relative ranking of the user in the income distribution.