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Volume
5, No. 1,
April 2006 |
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Tax Evasion and Monopoly Output
Decisions Revisited:
Strategic Firm Behavior |
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Sang-Ho Lee |
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Department
of Economics, Chonnam National University, Korea |
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Abstract |
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This note reexamines the model
of tax evasion of the monopolistic firm with profit taxes by
incorporating the firm's strategic behavior for tax avoidance. It is
shown that under certain conditions, the monopolist's decisions on
output and expenditure are no longer separable from the evasion
decision and there is a trade-off between production efficiency and
cost efficiency. We then derive the optimal profit tax rate to
investigate some properties of profit taxation. |
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Key words:
tax evasion; strategic expenditure; optimal profit taxation |
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JEL
classification:
D8; H26 |
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