TAX COLLISION: THE EFFECT OF VAT AND EXCISE DUTIES ON THE RETAIL PRICE OF UNLEADED GASOLINE

This paper researches the imposition of the Value Added Tax (VAT) on the excise-inclusive retail price of unleaded gasoline in the European Union countries. The issue of tax-on-tax arises when the excise duty is included into the VAT tax base. We analyse the tax burden shifting through the retail prices of gasoline in the context of tax collision between VAT and excise duty. The results show that VAT burden is over shifted toward the end-consumers through prices. Moreover, the tax interaction between VAT and the specific tax reduces the corrective effect of the excise duty imposed on the unleaded gasoline.