Tax enforcement may decrease government revenue
We analyze the relation between tax enforcement, aggregate output and government revenue when imperfectly competitive firms evade a specific output tax. We show that aggregate output decreases with tax enforcement. Government revenue increases with enforcement when the tax is low. When the tax is high, government revenue is either inversely U-shaped or decreasing with enforcement.
Volume (Year): 29 (2009)
Issue (Month): 4 ()
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- Ralph-C Bayer & Frank Cowell, 2006.
"Tax Compliance and Firms' Strategic Interdependence,"
School of Economics Working Papers
2006-09, University of Adelaide, School of Economics.
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