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Tax enforcement may decrease government revenue

Author Info

Listed author(s):
  • Martin Besfamille

    ()

    (Departamento de Economía, 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))

Abstract

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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Keywords: Tax enforcement; tax evasion; imperfect competition; government revenue.;

Find related papers by JEL classification:

  • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
  • D4 - Microeconomics - - Market Structure, Pricing, and Design

References listed on IDEAS
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  1. Cremer, Helmuth & Gahvari, Firouz, 1993. "Tax evasion and optimal commodity taxation," Journal of Public Economics, Elsevier, vol. 50(2), pages 261-275, February.
  2. Goerke, Laszlo & Runkel, Marco, 2006. "Profit Tax Evasion Under Oligopoly With Endogenous Market Structure," National Tax Journal, National Tax Association, vol. 59(4), pages 851-857, December.
  3. Virmani, Arvind, 1989. "Indirect tax evasion and production efficiency," Journal of Public Economics, Elsevier, vol. 39(2), pages 223-237, July.
  4. 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.
  5. Bayer, Ralph & Cowell, Frank, 2009. "Tax compliance and firms' strategic interdependence," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1131-1143, December.
  6. Laszlo Goerke & Marco Runkel, 2011. "Tax evasion and competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(5), pages 711-736, November.
  7. Helmuth Cremer & Firouz Gahvari, 1999. "Excise Tax Evasion, Tax Revenue, and Welfare," Public Finance Review, , vol. 27(1), pages 77-95, January.
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Cited by:

  1. Bayer, Ralph & Cowell, Frank, 2016. "Tax compliance by firms and audit policy," Research in Economics, Elsevier, vol. 70(1), pages 38-52.
  2. Laszlo Goerke, 2012. "The Optimal Structure of Commodity Taxation in a Monopoly with Tax Avoidance or Evasion," Public Finance Review, , vol. 40(4), pages 519-536, July.
  3. Bardey, David & Mejía, Daniel, 2016. "Informality and Optimal Public Policy," TSE Working Papers 16-720, Toulouse School of Economics (TSE).
  4. Laszlo Goerke, 2016. "Tax Evasion in a Cournot Oligopoly with Endogenous Entry," CESifo Working Paper Series 6239, CESifo Group Munich.

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