The Fundación Ramón Areces has awarded a grant to the Navarra Center for International Development resident fellows Miguel Ángel Borrella Mas and Raúl Bajo. Both will study for three years the effects that fiscal policy has on consumption and whether taxes can deter spending on certain products that are harmful to the environment without affecting others. "What rules allow us to design an optimal tax structure with which to achieve certain objectives while minimizing market distortion?", asks Borrella. The project title is Optimal excise taxation: theoretical analysis, empirical estimation, and policy recommendations with tax-collection and environmental implications.

The economic crisis derived from the coronavirus pandemic has made optimal collection even more relevant. "Tax collection has gained relevance in recent months both at the European level and at the national level within Spain due to the dual purpose they serve. First, its collection has special relevance due to the foreseeable rise in public debt arising from the Covid-19 economic crisis. Secondly, how it can deter the consumption of goods that generate certain negative externalities (such as, for example, emissions that are harmful to the environment or climate change) ", adds Borrella.

To achieve their goals, the researchers will combine theoretical and empirical modeling techniques often used in the economic literature, such as oligopoly theory, microeconomic modeling, panel data or structural estimation (econometric). At the end of the project period, the research is expected to be published in major economic journals as well as to help governments shape a fiscal policy that maximizes tax collection and helps the environment with minimal effect on overall consumption.