Repricing

The third purpose of tax is the repricing of certain goods. This means that items may be taxed according to whether they constitute a public ‘good’ or public ‘bad’. Tax can be applied in order to create a price that accurately reflects the benefits and costs to society.

For example, highertaxes on cigarettes and alcohol may discourage smoking and drinking of alcohol, both of which are negative for people’s health, while tax breaks on the price of bicycles or electric vehicles may incentivise people to choose these modes of transport that are better for the environment and for human health.

In this way, tax can be used to deter behaviours that are considered socially undesirable, and can be used to incentivise behaviour that is considered desirable to society as a whole.