According to a background report for the Finnish Economic Policy Council, lump-sum transfers are better at improving the equity of fuel taxation compared to reductions in income or fuel taxes. Tax reductions would disproportionately benefit high-income households. Furthermore, reductions in fuel taxes could create harmful incentives to increase driving.
Excise taxes on fuels are the most effective way to mitigate road transport emissions in Finland, as they create continuous incentives to reduce annual mileage.
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