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A note on the neutrality of profit taxes with tax evasion and tax avoidance

Author

Listed:
  • Che-chiang Huang

    (Department of Public Finance and taxation)

  • Horn-in Kuo

    (Department of International Business)

Abstract

Traditional literature exploring the relationship between production and tax evasion ignores the impact of other activities on these two decisions. This paper incorporates firms' tax avoidance activities into the model of tax evasion. In contrast to conventional results, we find that profit tax is not necessarily neutral. In addition, the independency or separability of tax evasion and production decisions may not hold either whenever tax avoidance is present.

Suggested Citation

  • Che-chiang Huang & Horn-in Kuo, 2014. "A note on the neutrality of profit taxes with tax evasion and tax avoidance," Economics Bulletin, AccessEcon, vol. 34(3), pages 2038-2043.
    • Handle: RePEc:ebl:ecbull:eb-14-00020
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2014/Volume34/EB-14-V34-I3-P187.pdf
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    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. Goerke, Laszlo & Runkel, Marco, 2006. "Profit Tax Evasion Under Oligopoly With Endogenous Market Structure," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(4), pages 851-857, December.
    3. Virmani, Arvind, 1989. "Indirect tax evasion and production efficiency," Journal of Public Economics, Elsevier, vol. 39(2), pages 223-237, July.
    4. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
    5. Lee, Kangoh, 2001. "Tax evasion and self-insurance," Journal of Public Economics, Elsevier, vol. 81(1), pages 73-81, July.
    6. 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.
    7. Lee, Kangoh, 1998. "Tax Evasion, Monopoly, and Nonneutral Profit Taxes," National Tax Journal, National Tax Association, vol. 51(n. 2), pages 333-38, June.
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    Cited by:

    1. Laszlo Goerke, 2021. "Tax Evasion by Firms," IAAEU Discussion Papers 202104, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).

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    More about this item

    Keywords

    profit taxes; tax evasion; tax avoidance.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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