Tax Compliance and Firms Strategicinterdependence
26 Pages Posted: 21 Feb 2008
Date Written: February 2006
We focus on a relatively neglected area of the tax-compliance literature ineconomics, the behaviour of firms. We examine the impact of alternativeaudit rules on receipts from a tax on profits in the context of strategicinter-dependence of firms. In the market firms may compete in terms ofeither output or price. The enforcement policy can have an effect onfirms&apos' behaviour in two dimensions - their market decisions as well astheir compliance behaviour. An appropriate design of the enforcementpolicy can thus have a "double dividend" by manipulating firms in bothdimensions.
JEL Classification: H20, H21
Suggested Citation: Suggested Citation
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By Frank Cowell