Missing Miles: Evasion Responses to Car Taxes

Abstract

We study a tax evasion response to car taxes in Finland, where used car importers overstate the mileage to reduce tax liability. First, we develop a tax evasion measure by comparing reported mileage upon import with subsequent information from vehicle inspections, and find that a decline in mileage — ”missing miles” occurs frequently. Second, we analyze a tax rate increase, and observe a reduction in the number of imported used cars, but only among non-evaders. Finally, we analyze an RCT varying the salience of tax enforcement measures, which suggests that providing information about new measures reduces missing miles.

• ISSN: 1795-1801 (Online)
• ISBN: 978-952-209-170-3 (Online)
• JEL: H21, H23, H26, C93
• Publication in PDF-format