Profit-Based Compensation and Corporate Tax Evasion
This paper attempts to analyze corporate tax evasion in a principal-agent framework. We assume that the firm's profit is positively related to managerial effort and that the executive compensation is profit-based. In addition, we consider the situation where the manager might underreport the firm's earnings to the shareholders or to the tax authorities and consume the unreported income as rent when the manager possesses private information regarding the firm's earnings. We show that, under these considerations, the production decision and tax evasion decision are not separable; moreover, the profit taxes are not neutral.
Volume (Year): 7 (2011)
Issue (Month): 2 (July)
|Contact details of provider:|| Postal: 100 Wenhwa Road, Seatwen, Taichung|
Web page: http://www.jem.org.tw/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:jec:journl:v:7:y:2011:i:2:p:185-198. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yi-Ju Su)
If references are entirely missing, you can add them using this form.