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Sales tax evasion: The case of monopolists

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Listed:
  • Sato, Hideki

Abstract

This study addresses the following two questions focusing on state sales tax and the behavior of a monopolist: (1) Under what conditions would a monopolist evade state sales tax even if evasion is costly? and (2) Can tax rates and enforcement be effective deterrents against evasion? The analysis reveals that, under certain conditions, a monopolist facing enforcement may underreport sales rather than not report them at all, even if evasion incurs costs. Furthermore, this study demonstrates that reducing tax rates and strengthening enforcement can effectively prevent tax evasion and that such preventive measures can lead to increased tax revenue.

Suggested Citation

  • Sato, Hideki, 2025. "Sales tax evasion: The case of monopolists," MPRA Paper 127426, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:127426
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    References listed on IDEAS

    as
    1. Cremer, Helmuth & Gahvari, Firouz, 1993. "Tax evasion and optimal commodity taxation," Journal of Public Economics, Elsevier, vol. 50(2), pages 261-275, February.
    2. Wang, Leonard F.S. & Conant, John L., 1988. "Corporate Tax Evasion and Output Decisions of the Uncertain Monopolist," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(4), pages 579-581, December.
    3. Wang, Leonard F.S. & Conant, John L., 1988. "Corporate Tax Evasion and Output Decisions of the Uncertain Monopolist," National Tax Journal, National Tax Association, vol. 41(4), pages 579-81, December.
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    More about this item

    Keywords

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    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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