Taxation and cross-border purchases of automotive fuels

The drivers of a small country such as Slovenia can buy fuel for their vehicles in either their homeland or in a neighbouring country, therefore its relative prices have a vital impact on tax revenue. The significant reduction in other tax revenues triggered by the economic crisis has made it necessary to analyse the Slovenian government’s excise tax policy. A simple demand model enables us to identify the impact of changes in tax policy on automotive fuel purchases, tax revenues, and the distributors’ earnings in the country’s inland and border regions. A spatial partition of the three hundred and twenty petrol stations sampled shows the allocations implemented by the petrol station owners, while the estimated "volume of transportation" is based on the number of vehicle crossings at road sites with automatic traffic meters. The direct- and cross-price elasticity of the demand for petrol and automotive diesel are estimated using panel and regional monthly time series data. The results indicate that the current excise tax policy has a strong impact on the sales of automotive diesel but has a weaker impact on petrol purchases. The excise tax policy generated a significantly higher increase in tax revenues and reduced the distributors’ net income.

Keywords: Retail trade, taxation, price elasticity, panel model, automotive fuels, excise taxes

Jel codes: L81, H2, D40, C23

Joze Mencinger, Meta Ahtik, Robert Volcjak, Taxation and cross-border purchases of automotive fuels in "ECONOMIA E POLITICA INDUSTRIALE " 4/2012, pp 5-23, DOI: 10.3280/POLI2012-004001