This discussion paper led to a publication in Empirical Economics 2013, 45(3), 1189-1204.
We analyse the effects of distortionary company car taxation through increased household carownership for the Netherlands. We use several identification strategies and demonstrate thatfor about 20 percent of households company car possession increases car ownership. Theannual welfare loss of distortionary company taxation through increased car ownership isgenerally rather small, maximally €120 per company car, and likely much less. However, forpolicies that exempt households from paying tax on their company car, the annual deadweightloss is likely higher.