Economic Effects of VAT on Passenger Transport

Effects of different VAT regimes in the 28 EU states on the passenger transport market

In this study for DG TAXUD, TML investigated the economic effects of the current VAT policies on the passenger transport market (via road, rail, air, and to a lesser extent water) in the European Union (EU).

The consortium is led by CASE (PL) and supported by TML and IHS (AT). In the first task of the study, TML and CASE mapped the current EU commercial passenger transport market, in terms of demand, supply, prices and consumer behaviour (elasticities). Based on data from TREMOVE and ETISplus, TML estimated transport demand (trips and passenger kilometres) for the different modes (bus, rail, metro, air) and geographical markets (urban/domestic non-urban/international intra-EU/international extra-EU). These estimates would serve as the basis for the assessment of the importance of any market distortions that were identified later on. The most important conclusions were:

  • Although national transport represents 99% of trips, it only covers 2/3 of pkm
  • Metro is the most used urban transport mode (46% of trips), but the longest trips are made by rail
  • Air transport has its largest markets in international transport, but 7% of domestic pkm are done by plane (0.5% of trips)
  • Most domestic trips are made by bus (80+%), mostly for short distances
  • Rail transport has the largest market shares in Western Europe

IHS led the second task, to list all currently valid rates for VAT and other relevant taxation on European passenger transport, including any exceptions. The review was validated by means of a survey targeted at national experts from Member States.

The collected data was then used as a guide during the compilation of a list of potential market distortions. They are summarised in the table below:

The final task was to assess the effects of policy scenarios able to address these distortions. Three models were used during this phase: TREMOVE (macro-demand effects and revenues from tickets and VAT), EDIP (general economic and societal effects) and an ad hoc city pairs model (detailed estimates of transport demand on certain connections). A description of each scenario and the assessment results are shown in the table below. In general, the effects on transport demand are expected to be small to moderate, notwithstanding larger shocks at the level of individual market players.


You can find the reports on the website of DG TAXUD or here:

Final report part I

Final report part II


2013 - 2014

funded by

European Commission, DG TAXUD


CASE (Poland, project leader), IHS (Austria)


Tim Breemersch

+32 16 74.51.23
reference: 12.71