Re-Examining the Neutrality of Profit Taxation and the Separability between Evasion and the Production Decisions of Firms

Che-Chiang Huang and Horn-In Kuo ()
Additional contact information
Che-Chiang Huang: Department of Public Finance and Taxation, China University of Technology, Taiwan
Horn-In Kuo: Department of International Business, Ming Chuan University, Taiwan

Journal of Economics and Management, 2014, vol. 10, issue 1, 91-100

Abstract: It is a very robust conventional view that profit taxation has no impact on the output level even in the presence of evasion with a random audit scheme. In addition, the firms' evasion and production decisions are separable as well. In this note we show that if the firm evades tax via underreporting quantities sold and the output level is essential to the audited profit of the tax authority, the profit tax is non-neutral and the separability between production and evasion decisions no longer holds. Otherwise, the traditional view is still robust.

Keywords: profit tax; tax neutrality; tax evasion; random audit scheme (search for similar items in EconPapers)
JEL-codes: H26 H32 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.jem.org.tw/content/pdf/Vol.10No.1/05.pdf (application/pdf)
http://www.jem.org.tw/content/abstract/Vol.10No.1/English/05.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jec:journl:v:10:y:2014:i:1:p:91-100

Access Statistics for this article

Journal of Economics and Management is currently edited by Cathy W. S. Chen and Shih-Wen Hu

More articles in Journal of Economics and Management from College of Business, Feng Chia University, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by Yi-Ju Su ().