The optimal structure of commodity taxation in a monopoly with tax avoidance or evasion

Laszlo Goerke

No 8, University of Tübingen Working Papers in Business and Economics from University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics

Abstract: If tax obligations are met, the balanced-budget substitution of an ad valorem tax on output for a specific tax not only raises a monopolist's production, but also represents a Pareto improvement. However, if tax avoidance or evasion is feasible and the marginal costs of such actions decline with the legal tax burden, a monopolist will respond to a balanced-budget substitution of an ad valorem tax for a specific tax by reducing output, while profits remain constant. Therefore, in the presence of tax avoidance or evasion activities a move towards specific taxation can represent a Pareto improvement.

Keywords: Ad valorem tax; Monopoly; Output; Tax avoidance; Tax evasion; Specific tax (search for similar items in EconPapers)
JEL-codes: H21 H25 H26 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-acc and nep-pub
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Related works:
Journal Article: The Optimal Structure of Commodity Taxation in a Monopoly with Tax Avoidance or Evasion (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuewef:8

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