Tax enforcement may decrease government revenue

Martin Besfamille, Philippe De Donder and Jean-Marie Lozachmeur

Economics Bulletin, 2009, vol. 29, issue 4, 2665-2672

Abstract: We analyze the relation between tax enforcement, aggregate output and government revenue when imperfectly competitive firms evade a specific output tax. We show that aggregate output decreases with tax enforcement. Government revenue increases with enforcement when the tax is low. When the tax is high, government revenue is either inversely U-shaped or decreasing with enforcement.

Keywords: Tax enforcement; tax evasion; imperfect competition; government revenue. (search for similar items in EconPapers)
JEL-codes: D4 H3 (search for similar items in EconPapers)
Date: 2009-10-25
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Citations: View citations in EconPapers (16)

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