Tax Evasion and Monopoly Output Decisions Revisited: Strategic Firm Behavior
This note reexamines the model of tax evasion of the monopolistic firm with profit taxes by incorporating the firm's strategic behavior for tax avoidance. It is shown that under certain conditions, the monopolist's decisions on output and expenditure are no longer separable from the evasion decision and there is a trade-off between production efficiency and cost efficiency. We then derive the optimal profit tax rate to investigate some properties of profit taxation.
Volume (Year): 5 (2006)
Issue (Month): 1 (April)
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- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
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- Leonard F.S. Wang, 1990. "Tax Evasion and Monopoly Output Decisions with Endogenous Probability of Detection," Public Finance Review, , vol. 18(4), pages 480-487, October.
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- Marrelli, Massimo, 1984. "On indirect tax evasion," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 181-196, November.
- Sang-Ho Lee & Hae-Shin Hwang, 2003. "Partial Ownership For The Public Firm And Competition," The Japanese Economic Review, Japanese Economic Association, vol. 54(3), pages 324-335.
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