We study the consumer response and tax revenue implications of the early announcement of a durable good tax. In 2015, the Danish government announced a tax hike on electric vehicles several months before its implementation. There was a dramatic surge in sales of Tesla Model S vehicles just before the tax came into effect, and a dramatic ebb in the months following. We find that the government lost 169 million DKK (23 million Euro) in tax revenue on luxury vehicles by announcing the tax change before its implementation. We further find that speculation played at most a limited role in the Tesla sales surge. In total, final consumers of Teslas gained from the roll-out of the law change by avoiding the new tax.
- Tax announcements
- Durable goods
- Electric vehicles
Asplund, M., Jinkins, D., Lutz, C., & Paizs, G. (2019). Winners and Losers from an Announced Durable Tax Hike: Tesla in Denmark. Applied Economics, 51(7), 722-730. https://doi.org/10.1080/00036846.2018.1520963