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Imperfect Competition and Tax Evasion

Author

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  • Wen-Ya Chang

    (Fu-Jen Catholic University and Academia Sinica, Taiwan)

  • Ching-Chong Lai

    (Feng Chia University and Academia Sinica, Taiwan)

  • Juin-Jen Chang

    (Fu-Jen Catholic University, Taiwan)

Abstract

This article applies the central feature of imperfect competition in the goods market to examine the validity of the Peacock and Shaw assertion that an increase in tax evasion will definitely lead to a higher domestic income and a lower level of total tax collections. The authors provide, for the first time, a solid microfoundation for the macroeconomic equilibrium with the activity of tax evasion. It is shown that the profit margin in imperfect competition is the key factor in determining whether the Peacock and Shaw belief is valid.

Suggested Citation

  • Wen-Ya Chang & Ching-Chong Lai & Juin-Jen Chang, 1999. "Imperfect Competition and Tax Evasion," Public Finance Review, , vol. 27(3), pages 371-381, May.
  • Handle: RePEc:sae:pubfin:v:27:y:1999:i:3:p:371-381
    DOI: 10.1177/109114219902700306
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    References listed on IDEAS

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    3. Hamaguchi, Yoshihiro, 2020. "Dynamic analysis of bribery firms’ environmental tax evasion in an emissions trading market," Journal of Macroeconomics, Elsevier, vol. 63(C).
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    5. Soldatos, Gerasimos T. & Zikos, Spyros, 2000. "Money, «Laissez-Faire» and the Underground Economy," MPRA Paper 57628, University Library of Munich, Germany.

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