Tax Enforcement May Decrease Government Revenue

Economics Bulletin, Forthcoming

Posted: 22 Oct 2009

See all articles by Martin Besfamille

Martin Besfamille

Instituto de Economía, Pontificia Universidad Católica de Chile

Philippe De Donder

University of Toulouse 1 - Toulouse School of Economics (TSE)

Jean-Marie Lozachmeur

University of Toulouse 1

Date Written: October 22, 2009

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 evasion, imperfect competition, government revenue

JEL Classification: D43, H26, H32

Suggested Citation

Besfamille, Martin and De Donder, Philippe and Lozachmeur, Jean-Marie, Tax Enforcement May Decrease Government Revenue (October 22, 2009). Economics Bulletin, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1492756

Martin Besfamille (Contact Author)

Instituto de Economía, Pontificia Universidad Católica de Chile ( email )

Casilla 76
Correo 17
Santiago
Chile
++56 2 2354 7105 (Phone)

Philippe De Donder

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Jean-Marie Lozachmeur

University of Toulouse 1 ( email )

Place Anatole France
Toulouse Cedex, F-31042
France

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