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Indirect Taxation, Tax Evasion and Profts

Author

Listed:
  • Luciano Fanti

    (University of Pisa)

  • Domenico Buccella

    (Kozminski University)

Abstract

In a duopoly with differentiated products under price competition, this paper analyses the frms’ tax compliance behaviour in the presence of tax evasion to challenge the conventional wisdom that indirect taxes penalise profts. In contrast to the preceding literature, it is shown that indirect taxes can increase frms’ profts. The appearance of this unconventional fnding is more likely when there exists a sufficient competitive pressure in the industry and the effort for detecting evasion is not too strong

Suggested Citation

  • Luciano Fanti & Domenico Buccella, 2022. "Indirect Taxation, Tax Evasion and Profts," Hacienda Pública Española / Review of Public Economics, IEF, vol. 242(3), pages 91-109, September.
    • Handle: RePEc:hpe:journl:y:2022:v:242:i:3:p:91-109
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Tax compliance; Sales tax; Tax evasion; Proft; Bertrand competition.;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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