ON TAXATION &amp; UNDERSTATED MONOPOLY PROFITS

Section: Notesmentioning

confidence: 99%

Tax Evasion and Entrepreneurial Flexibility

Panteghini

2000

“…Cronshaw (1995) examined tax compliance in a setting where, on one hand, the tax authority does not know taxpayer income and, on the other hand, the taxpayer does not know the authority's audit capabilities. Kreutzer and Lee (1986), Wang (1990), Yaniv (1996), and Lee (1998), among others, examined the potential impact of tax evasion opportunities on monopoly output and profits.…”

mentioning

confidence: 99%

Tax Audit Uncertainty and the Work-Versus-Leisure Decision

Horowitz

2000

PUBLIC FINANCE REVIEWHorowitz, Horowitz / TAX AUDIT UNCERTAINTY The possibility of being audited provides an incentive for the more larcenous among us to accurately report taxable income when underreporting income carries a penalty. It seems safe to assume that by increasing either the likelihood of an income tax audit or the penalty for underreporting taxable income, the tax authority can reduce the extent to which conscious cheating takes place. That seemingly safe assumption, however, becomes much less so when the linkage between posttax income and the work-versus-leisure decision is taken into account. This article explores the ubiquitous and confounding effects on both reported income and work effort for non-risk-preferring taxpayers of changes in the audit probability, the sanction rate, the tax rate, and taxpayer wealth. It is shown that contrary to intuition and popular wisdom, raising the audit probability or the sanction rate will not necessarily lead to higher reported incomes, and neither increases in the tax rate nor greater taxpayer wealth will necessarily encourage increased leisure.

“…In addition, our study revisits the previous finding that tax evasion does not affect firms' activity choice (for early contributions, see Kreutzer and Lee 1986;Wang and Conant 1988;and Wang 1990). Yaniv (1995) establishes a generic model in which firm activity is generally separable from the decision to evade taxes; this is an important component of our model as well.…”

Section: Relation To the Literaturementioning

confidence: 55%

Tax Evasion and Tacit Collusion

Baumann

Friehe

2012

This article analyzes the interaction between tax evasion and tacit collusion. We show that the possibility of evading taxes generally influences the incentives to form a cartel. We establish that whether tax evasion increases or decreases the set of circumstances allowing stable collusion depends on (1) the relation between the benefits of tax evasion and legal after-tax profits and (2) effective enforcement of antitrust laws. In considering variations in tax enforcement and antitrust enforcement, we find that stricter tax enforcement may actually increase the level of tax evasion, as it may promote the cartelization of industries. In contrast, stricter antitrust enforcement lowers incentives for cartelization, thereby possibly reducing tax evasion at the same time.