IDEAS home Printed from https://ideas.repec.org/a/ntj/journl/v51y1998i2p333-38.html
   My bibliography  Save this article

Tax Evasion, Monopoly, and Nonneutral Profit Taxes

Author

Listed:
  • Lee, Kangoh

Abstract

It is known in the literature that tax evasion does not influence the monopolist's output decision, and hence, profit taxes are neutral, even in the presence of tax evasion. This result is based on the assumption that the audit probability and the penalty rate are fixed or depend on the understatement or overstatement of relevant economic indicators. However, under alternative and perhaps more reasonable formulations of the audit probability, the neutrality of profit taxes may not be preserved. In particular, if the audit probability or the penalty rate varies with some reports made by the monopolist (such as reported cost or reported revenue or output level), then profit taxes are no longer neutral.

Suggested Citation

  • Lee, Kangoh, 1998. "Tax Evasion, Monopoly, and Nonneutral Profit Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(2), pages 333-338, June.
    • Handle: RePEc:ntj:journl:v:51:y:1998:i:2:p:333-38
    DOI: 10.1086/NTJ41789330
    as

    Download full text from publisher

    File URL: https://doi.org/10.1086/NTJ41789330
    Download Restriction: Access is restricted to subscribers and members of the National Tax Association.
    File URL: https://doi.org/10.1086/NTJ41789330
    Download Restriction: Access is restricted to subscribers and members of the National Tax Association.
    File URL: https://libkey.io/10.1086/NTJ41789330?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gideon Yaniv, 1996. "Tax Evasion and Monopoly Output Decisions: Note," Public Finance Review, , vol. 24(4), pages 501-505, October.
    2. Virmani, Arvind, 1989. "Indirect tax evasion and production efficiency," Journal of Public Economics, Elsevier, vol. 39(2), pages 223-237, July.
    3. Yaniv, Gideon, 1995. "A Note on the Tax-Evading Firm," National Tax Journal, National Tax Association;National Tax Journal, vol. 48(1), pages 113-120, March.
    4. 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.
    5. Marrelli, Massimo, 1984. "On indirect tax evasion," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 181-196, November.
    6. Srinivasan, T. N., 1973. "Tax evasion: A model," Journal of Public Economics, Elsevier, vol. 2(4), pages 339-346.
    7. 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.
    8. Lee, Kangoh, 1995. "Risk Taking and Business Income Tax Evasion," Public Finance = Finances publiques, , vol. 50(1), pages 106-120.
    9. Shlomo Yitzhaki, 1987. "On the Excess Burden of Tax Evasion," Public Finance Review, , vol. 15(2), pages 123-137, April.
    10. Kreutzer, David & Lee, Dwight R., 1988. "Tax Evasion and Monopoly Output Decisions: A Reply," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(4), pages 583-584, December.
    11. Yaniv, Gideon, 1995. "A Note on the Tax-Evading Firm," National Tax Journal, National Tax Association, vol. 48(1), pages 113-20, March.
    12. Kreutzer, David & Lee, Dwight R., 1988. "Tax Evasion and Monopoly Output Decisions: A Reply," National Tax Journal, National Tax Association, vol. 41(4), pages 583-84, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Balamatsias, Pavlos, 2017. "Inequality, imperfect competition, and fiscal policy," MPRA Paper 82178, University Library of Munich, Germany.
    2. Crocker, Keith J. & Slemrod, Joel, 2005. "Corporate tax evasion with agency costs," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1593-1610, September.
    3. Choi, Jay Pil & Furusawa, Taiji & Ishikawa, Jota, 2020. "Transfer pricing regulation and tax competition," Journal of International Economics, Elsevier, vol. 127(C).
    4. Bayer, Ralph & Cowell, Frank, 2009. "Tax compliance and firms' strategic interdependence," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1131-1143, December.
    5. Laszlo Goerke, 2007. "Corporate and personal income tax declarations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(3), pages 281-292, June.
    6. Tatiana Malinina, 2010. "Recognition and Measurement of Tax Expenditures: International Experience and Russian Practice," Research Paper Series, Gaidar Institute for Economic Policy, issue 146P.
    7. Ralph‐C. Bayer, 2022. "The double dividend of relative auditing—Theory and experiments on corporate tax enforcement," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(6), pages 1433-1462, December.
    8. Luciano Fanti & Domenico Buccella, 2020. "Tax Evasion and Unions in a Cournot duopoly," Discussion Papers 2020/266, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    9. Laszlo Goerke & Marco Runkel, 2011. "Tax evasion and competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(5), pages 711-736, November.
    10. Domenico Buccella & Luciano Fanti & Luca Gori, 2023. "Tax evasion in a Cournot duopoly with unions," Discussion Papers 2023/293, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    11. Bayer, Ralph & Cowell, Frank, 2016. "Tax compliance by firms and audit policy," Research in Economics, Elsevier, vol. 70(1), pages 38-52.
    12. Ralph-C. Bayer, 2017. "The Double Dividend of Relative Auditing – Theory and Experiments on Corporate Tax Enforcement," School of Economics and Public Policy Working Papers 2017-14, University of Adelaide, School of Economics and Public Policy.
    13. Laszlo Goerke, 2021. "Tax Evasion by Firms," IAAEU Discussion Papers 202104, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    14. Laszlo Goerke, 2008. "Bureaucratic corruption and profit tax evasion," Economics of Governance, Springer, vol. 9(2), pages 177-196, May.
    15. Leonard F. S. Wang & Ji Sun, 2023. "Corporate profit tax, firm entry with unemployment, and income inequality," Bulletin of Economic Research, Wiley Blackwell, vol. 75(2), pages 380-392, April.
    16. Frank A Cowell, 2003. "Sticks and Carrots," STICERD - Distributional Analysis Research Programme Papers 68, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    17. K. L. Glen Ueng & Chiaen J. Wu, 2009. "A note on the neutrality of profit taxes and tax compliance with imperfect detection," Economics Bulletin, AccessEcon, vol. 29(1), pages 312-318.
    18. Paolo M. Panteghini, 2000. "Tax Evasion and Entrepreneurial Flexibility," Public Finance Review, , vol. 28(3), pages 199-209, May.
    19. Ira Horowitz & Ann R. Horowitz, 2000. "Tax Audit Uncertainty and the Work-Versus-Leisure Decision," Public Finance Review, , vol. 28(6), pages 491-510, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lee, Kangoh, 1998. "Tax Evasion, Monopoly, and Nonneutral Profit Taxes," National Tax Journal, National Tax Association, vol. 51(n. 2), pages 333-38, June.
    2. Laszlo Goerke & Marco Runkel, 2011. "Tax evasion and competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(5), pages 711-736, November.
    3. K. L. Glen Ueng & Chiaen J. Wu, 2009. "A note on the neutrality of profit taxes and tax compliance with imperfect detection," Economics Bulletin, AccessEcon, vol. 29(1), pages 312-318.
    4. David Joulfaian, 2009. "Bribes and Business Tax Evasion," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(2), pages 227-244, December.
    5. Sang-Ho Lee, 2006. "Tax Evasion and Monopoly Output Decisions Revisited: Strategic Firm Behavior," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 5(1), pages 83-92, April.
    6. Frank A Cowell, 2003. "Sticks and Carrots," STICERD - Distributional Analysis Research Programme Papers 68, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    7. 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.
    8. Leopoldo Fergusson & Carlos Molina & Juan Felipe Riaño, 2019. "Consumers as VAT “Evaders”: Incidence, Social Bias, and Correlates in Colombia," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 21-67, April.
    9. Laszlo Goerke, 2007. "Corporate and personal income tax declarations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(3), pages 281-292, June.
    10. Luciano Fanti & Domenico Buccella, 2020. "Tax Evasion and Unions in a Cournot duopoly," Discussion Papers 2020/266, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    11. Domenico Buccella & Luciano Fanti & Luca Gori, 2023. "Tax evasion in a Cournot duopoly with unions," Discussion Papers 2023/293, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    12. Laszlo Goerke, 2021. "Tax Evasion by Firms," IAAEU Discussion Papers 202104, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    13. T. C. Michael Wu & C. C. Yang, 2011. "Monopolists' Profit Tax Evasion Revisited," Public Finance Review, , vol. 39(6), pages 831-840, November.
    14. Florian Baumann & Tim Friehe, 2013. "Tax Evasion and Tacit Collusion," Public Finance Review, , vol. 41(5), pages 633-657, September.
    15. Paolo M. Panteghini, 2000. "Tax Evasion and Entrepreneurial Flexibility," Public Finance Review, , vol. 28(3), pages 199-209, May.
    16. Mary E. Lovely, 1995. "Optimal Commodity Taxation With Costly Noncompliance," Public Finance Review, , vol. 23(1), pages 115-130, January.
    17. Nur-tegin Kanybek D, 2008. "Determinants of Business Tax Compliance," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-28, July.
    18. Ranjan Ray, 1994. "The Reform And Design Of Commodity Taxes In The Presence Of Tax Evasion With Illustrative Evidence From India," Working papers 26, Centre for Development Economics, Delhi School of Economics.
    19. Besfamille, Martin & De Donder, Philippe & Lozachmeur, Jean-Marie, 2009. "The Political Economy of the (Weak) Enforcement of Sales Tax," CEPR Discussion Papers 7108, C.E.P.R. Discussion Papers.
    20. Nipoli Kamdar, 1997. "Corporate income tax compliance: A time series analysis," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 25(1), pages 37-49, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ntj:journl:v:51:y:1998:i:2:p:333-38. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: The University of Chicago Press (email available below). General contact details of provider: https://www.ntanet.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.