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A note on the neutrality of profit taxes and tax compliance with imperfect detection

Author

Listed:
  • K. L. Glen Ueng

    (Department of Public Finance, National Chengchi University)

  • Chiaen J. Wu

    (Department of Public Finance, National Chengchi University)

Abstract

In a tax-evasion model with profit tax, we reexamine and clarify the issues of neutrality and separability with imperfect detection of tax fraud. With this more realistic setting, we show that the profit tax is not necessarily neutral and the separability conclusion may not hold. Furthermore, the property of non-neutrality may coexist with that of separability or inseparability. However, in contrast to the traditional conclusion, raising the audit probability may reduce the tax compliance when the property of inseparability is present.

Suggested Citation

  • K. L. Glen Ueng & Chiaen J. Wu, 2009. "A note on the neutrality of profit taxes and tax compliance with imperfect detection," Economics Bulletin, AccessEcon, vol. 29(1), pages 312-318.
    • Handle: RePEc:ebl:ecbull:eb-08h00009
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    References listed on IDEAS

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    Cited by:

    1. Horn‐In Kuo & Cheng‐Hau Peng & K. L. Glen Ueng, 2021. "On the Neutrality of Profit Taxation in a Mixed Oligopoly," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(5), pages 1012-1021, October.

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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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