Recent decades have seen growing ownership and use of motor vehicles in sub-Saharan Africa (SSA). Although, compared with developed countries, SSA countries still have relatively few cars and those cars are concentrated in the largest cities, problems associated with motoring are a growing concern in the region.These include congestion, pollution, and road traffic deaths. They arise in part because when making decisions about whether to drive, when to drive and what type of vehicle to drive, people generally only consider the private costs and benefits of their decisions and not the costs and benefits for wider society. These differences between private and social costs and benefits are termed 'externalities' by economists.Taxes can be used to better align the private costs and benefits of motoring with the social costs and benefits. This report sets out some key issues and policy options for 'green' motor taxes in SSA. It provides an overview of the principles of motor taxation, describes the policy context in SSA, and discusses the potential for policy options that could improve existing tax systems in the region. Principles of motoring taxationThe externalities associated with motor vehicles -including congestion, local air pollution, road traffic fatalities and global climate change -are associated with the use of a vehicle and may vary substantially based on the time and place of driving, as well as the fuel efficiency and other characteristics of vehicles. Thus, the ideal tax would vary with time, place and emissions to account for all of these costs at once. However, such a tax is not administratively feasible in practice. Among feasible taxes, fuel taxes and congestion charges are relatively well targeted at pollution and congestion, respectively, though congestion charges have relatively high set-up and running costs. Vehicle ownership taxes that vary with emissions and location can also help to address local externalities such as particulate pollution and congestion. They do, however, involve collecting taxes from potentially millions of vehicle owners, which may be challenging. Taxes on vehicle purchase 'Green' motor taxation: issues and options The Institute for Fiscal Studies, September 2021 'Green' motor taxation: issues and options The Institute for Fiscal Studies, September 2021 8 Key findings1 With the exception of relatively high-income nations in southern Africa, countries in SSA have few vehicles on average (26 per 1,000 people) relative to the rest of the world (182 per 1,000 people). However, economic growth and rising household incomes mean that this number is growing and is likely to continue doing so.2 Despite the low number of vehicles per capita, the social costs of 'Green' motor taxation: issues and options The Institute for Fiscal Studies
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