Indirect Taxation, Tax Evasion and Profts

Luciano Fanti and Domenico Buccella

Hacienda Pública Española / Review of Public Economics, 2022, vol. 242, issue 3, 91-109

Abstract: In a duopoly with differentiated products under price competition, this paper analyses the frms’ tax compliance behaviour in the presence of tax evasion to challenge the conventional wisdom that indirect taxes penalise profts. In contrast to the preceding literature, it is shown that indirect taxes can increase frms’ profts. The appearance of this unconventional fnding is more likely when there exists a sufficient competitive pressure in the industry and the effort for detecting evasion is not too strong

Keywords: Tax compliance; Sales tax; Tax evasion; Proft; Bertrand competition. (search for similar items in EconPapers)
JEL-codes: H25 H26 H32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hpe:journl:y:2022:v:242:i:3:p:91-109

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