Monopolists' Profit Tax Evasion Revisited
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 firmâ€™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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