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Title:Tax evasion and competition PDF Logo
Authors:Goerke, Laszlo
Runkel, Marco
Issue Date:2007
Series/Report no.:CESifo working paper 2104
Abstract:Using a Cournot oligopoly model with an endogenous number of firms and evasion of indirect taxes, this paper shows that more intense competition may have the negative side-effect of eroding tax revenues by increasing tax evasion. This will be the case if market entry costs decrease. A similar result will hold if marginal production costs fall and demand is either weakly concave or convex and inelastic. The desirable result of more competition, less evasion and higher tax revenues will be obtained if (a) marginal production costs fall and demand is convex and elastic or (b) the demand elasticity increases.
JEL:H25
H26
L13
L51
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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