Taxing tourism: The case of rental cars in Mallorca

Abstract Tourism statistics point towards increased tourist mobility in holiday destinations, with a subsequent rise in associated externalities, above all those related with the use of hire cars. This paper therefore suggests that a fixed-rate tax should be levied on vehicle hire in order to reduce congestion externalities and thus achieve more efficient traffic levels. With this purpose in mind, count data models were used to assess alternative ways of modelling the demand function for hire cars in Mallorca (Spain) so that the corrective potential of the proposed tax could then be analysed. Although the inelasticity that was observed might indicate a low short-run capacity to internalise costs, it also represents a high potential for raising revenue that could be used to fund alternative means of group transport. In the mid-run, this would lead to increased elasticity and, in consequence, to better internalising effectiveness.

[1]  S. Proost,et al.  Reforming Transport Pricing in the European Union , 2001 .

[2]  David M Newbery,et al.  Pricing and Congestion: Economic Principles Relevant to Pricing Roads , 1990 .

[3]  Felix Oberholzer-Gee,et al.  Pricing road use: politico-economic and fairness considerations , 2002 .

[4]  Daniel Hellerstein,et al.  Using Count Data Models in Travel Cost Analysis with Aggregate Data , 1991 .

[5]  Herbert Miehsler,et al.  EUROPEAN CONFERENCE OF MINISTERS OF TRANSPORT , 1983 .

[6]  A. Riera,et al.  Tourism and environmental taxes. With special reference to the "Balearic ecotax". , 2003 .

[7]  L. Goulder,et al.  Environmental taxation and the double dividend: A reader's guide , 1995 .

[8]  Claus Doll,et al.  External costs of transport: accident, environmental and congestion costs of transport in Western Europe , 2000 .

[9]  P. Nunes.  Towards a European Strategy for the security of energy supply , 2002 .

[10]  V. Smith,et al.  Selection and Recreation Demand , 1988 .

[11]  Erik T. Verhoef,et al.  The Economics of Regulating Road Transport , 1996 .

[12]  Road transport taxation: a critical review of their internalising effectiveness , 2005 .

[13]  J. Dixon.  Tourism and the environment in the Caribbean - an economic framework , 2000 .

[14]  Roger Vickerman,et al.  An overview of policy instruments , 2001 .

[15]  Td Hau,et al.  CONGESTION PRICING AND ROAD INVESTMENT. , 1998 .

[16]  Kenneth A. Small,et al.  Road Pricing for Congestion Management: The Transition from Theory to Policy - eScholarship , 1998 .

[17]  J. Mullahy.  Specification and testing of some modified count data models , 1986 .

[18]  A. Cameron,et al.  Econometric models based on count data. Comparisons and applications of some estimators and tests , 1986 .

[19]  H. Clarke,et al.  Tourism, economic welfare and efficient pricing. , 1993 .

[20]  Stef Proost,et al.  Reforming transport pricing in the European Union : a modelling approach , 2001 .

[21]  Peter Jones,et al.  GAINING PUBLIC SUPPORT FOR ROAD PRICING THROUGH A PACKAGE APPROACH , 1991 .

[22]  Kenneth Button,et al.  Road Pricing, Traffic Congestion and the Environment , 1998 .

[23]  Peter Jones,et al.  Urban road pricing: public acceptability and barriers to implementation , 1998 .

[24]  S. Potter,et al.  Fair and Efficient Pricing in Transport; the role of charges and taxes , 2000 .

[25]  Xavier Labandeira Villot,et al.  Energía, fiscalidad y medio ambiente en España , 2002 .

[26]  Td Hau.  Congestion charging mechanisms for roads , 1992 .

[27]  W. Harrington,et al.  OVERCOMING PUBLIC AVERSION TO CONGESTION PRICING , 2001 .

[28]  W. Greene,et al.  Accounting for Excess Zeros and Sample Selection in Poisson and Negative Binomial Regression Models , 1994 .

[29]  A. Font,et al.  Fiscalidad sobre el transporte rodado: una revisión crítica de su efectividad internalizadora * , 2005 .

[30]  T. Litman.  Distance-Based Charges; A Practical Strategy for More Optimal Vehicle Pricing , 1999 .

[31]  J. G. Cragg.  Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods , 1971 .

[32]  Diane Lambert,et al.  Zero-inflacted Poisson regression, with an application to defects in manufacturing , 1992 .

[33]  Kurt Van Dender,et al.  The external costs of transport , 2001 .

[34]  Q. Vuong.  Likelihood Ratio Tests for Model Selection and Non-Nested Hypotheses , 1989 .

[35]  Kenneth Button.  Transport, The Environment, And Economic Policy , 1993 .