Optimal Evaluation of Car Ownership Tax and Car Use Tax with an Approach for Minimization of Externalities: Case Study for Tehran

Large increase of vehicles in recent years has led to increase in externalities of transportation in urban streets. Determining of optimal structure of car tax is one of the ways to increase social welfare and to control externalities of transportation. The purpose of this paper is determining optimal car ownership and car use tax in order to minimize car externalities in urban streets. The externality considered in this paper is air pollution including different emissions. Functions used in optimization model are logit discrete choice function and demand function for kilometers. Required data obtained from library sources and various organs like “Tehran Vehicle Technical Inspection Bureau” and “Air Quality Control Company” in Iran. According to obtained results، car ownership and car use tax have been evaluated Based on engine size، vehicle age and fuel. For instance، the average car ownership tax of vehicles with engine size less than 1400 cc and age of less than five years is 6600 Tomans whereas average obtained tax for this group is currently 2000 Tomans. The results show that at first، gasoline cars should pay more car ownership tax and variable cost than hybrid cars with similar age. Secondly، cars with higher age should pay more tax than cars with less age with similar fuel. Also it was found that changing in car ownership tax has low effect on amount of emissions while changing in variable cost influence amount of emissions seriously.