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Tax enforcement may decrease government revenue

  • Martin Besfamille

    ()

    (Departamento de EconomĂ­a, Universidad Torcuato Di Tella)

  • Philippe De Donder

    ()

    (Toulouse School of Economics (GREMAQ-CNRS and IDEI))

  • Jean Marie Lozachmeur

    ()

    (Toulouse School of Economics (GREMAQ-CNRS and IDEI))

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.

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I4-P19.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 4 ()
Pages: 2665-2672

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Handle: RePEc:ebl:ecbull:eb-09-00621
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  1. Virmani, Arvind, 1989. "Indirect tax evasion and production efficiency," Journal of Public Economics, Elsevier, vol. 39(2), pages 223-237, July.
  2. Cremer, Helmuth & Gahvari, Firouz, 1993. "Tax evasion and optimal commodity taxation," Journal of Public Economics, Elsevier, vol. 50(2), pages 261-275, February.
  3. Bayer, Ralph & Cowell, Frank, 2009. "Tax compliance and firms' strategic interdependence," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1131-1143, December.
  4. Laszlo Goerke & Marco Runkel, 2011. "Tax evasion and competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(5), pages 711-736, November.
  5. Goerke, Laszlo & Runkel, Marco, 2006. "Profit Tax Evasion under Oligopoly with Endogenous Market Structure," National Tax Journal, National Tax Association, vol. 59(4), pages 851-57, December.
  6. Helmuth Cremer & Firouz Gahvari, 1999. "Excise Tax Evasion, Tax Revenue, and Welfare," Public Finance Review, , vol. 27(1), pages 77-95, January.
  7. Marrelli, M. & Martina, R., 1988. "Tax evasion and strategic behaviour of the firms," Journal of Public Economics, Elsevier, vol. 37(1), pages 55-69, October.
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