Optimal excise taxation: theoretical analysis, empirical estimation, and policy recommendations with tax-collection and environmental implications.
Contributors: Miguel Ángel Borrella Mas, Raúl Bajo-Buenestado
Financing: Fundación Ramón Areces (2020-2022)

How should taxes be designed in order to achieve higher tax-collection while affecting consumption as little as possible? Is it possible to use taxes to discourage the consumption of certain goods (for example, those that exert negative environmental externalities) to a certain group of consumers, without harming the consumption of others? Or in other words, what rules allow us to design an optimal tax structure through which to achieve certain objectives while minimizing market distortions? This is the main research question that we want to study in this project proposal. Specifically, the scope of the project focuses on taxes on the consumption of certain goods. These taxes have become increasingly important in recent months both at the European level and at the national level within Spain due to the dual purpose they serve. First, the revenue raise for necessary governmental functions, of particular relevance due to the foreseeable rise in public debt as a result of the COVID-19 crisis. Second, the reduction in the consumption of goods that exert negative externalities –such as emissions that are harmful to the environment or climate change.

The project is expected to be carried out by using a combination of theoretical and empirical modeling techniques frequently used in the economics literature, such as oligopoly theory, microeconomic modeling, panel data, or structural (econometric) estimation. By using these techniques, it is expected to develop a series of works with a twofold purpose. On the one hand, the dissemination of knowledge and results through publications in top economics journals with high recognized international prestige. On the other hand, to inform about the design and implementation of an optimal fiscal policy that maximizes the government's objective (for example, to achieve a certain tax-collection or to deter certain consumers from consuming a good) while minimizing market distortions.