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Tax enforcement may decrease government revenue

Author

Listed:
  • 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.

Suggested Citation

  • Martin Besfamille & Philippe De Donder & Jean Marie Lozachmeur, 2009. "Tax enforcement may decrease government revenue," Economics Bulletin, AccessEcon, vol. 29(4), pages 2665-2672.
  • Handle: RePEc:ebl:ecbull:eb-09-00621
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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I4-P19.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Bayer, Ralph & Cowell, Frank, 2009. "Tax compliance and firms' strategic interdependence," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1131-1143, December.
    3. Cremer, Helmuth & Gahvari, Firouz, 1993. "Tax evasion and optimal commodity taxation," Journal of Public Economics, Elsevier, vol. 50(2), pages 261-275, February.
    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. Virmani, Arvind, 1989. "Indirect tax evasion and production efficiency," Journal of Public Economics, Elsevier, vol. 39(2), pages 223-237, July.
    6. 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.
    7. Helmuth Cremer & Firouz Gahvari, 1999. "Excise Tax Evasion, Tax Revenue, and Welfare," Public Finance Review, , vol. 27(1), pages 77-95, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. 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.
    2. David Bardey & Daniel Mejia, 2016. "Informality and Optimal Public Policy," DOCUMENTOS CEDE 014229, UNIVERSIDAD DE LOS ANDES-CEDE.
    3. Laszlo Goerke, 2017. "Tax evasion in a Cournot oligopoly with endogenous entry," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 754-779, September.
    4. Bayer, Ralph & Cowell, Frank, 2016. "Tax compliance by firms and audit policy," Research in Economics, Elsevier, vol. 70(1), pages 38-52.

    More about this item

    Keywords

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

    JEL classification:

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

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