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Monopolists' Profit Tax Evasion Revisited: When Firms Have Objectives Other than Maximizing Profit

  • T. C. Michael Wu


    (Department of Public Finance, Feng Chia University, Taichung, Taiwan, Republic of China)

  • C. C. Yang

    (Institute of Economics, Academia Sinica, Taipei, Taiwan, Republic of China, Department of Public Finance, National Chengchi University, Taipei, Taiwan, Republic of China, and Department of Public Finance, Feng Chia University, Taichung, Taiwan, Republic of China)

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    This article revisits the issues of neutrality and separability for a monopolistic firm. It is shown that as long as the monopolistic firm has objectives other than maximizing profit, then in general: (1) profit taxes will not be neutral, and (2) the firm's production and evasion decisions will not be separable from each other. The authors argue that the nonneutrality result of profit taxes is quite robust; however, there are plausible exceptions to the nonseparability result of profit taxes.

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    Article provided by in its journal Public Finance Review.

    Volume (Year): 39 (2011)
    Issue (Month): 6 (November)
    Pages: 831-840

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    Handle: RePEc:sae:pubfin:v:39:y:2011:i:6:p:831-840
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