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Martin Besfamille, Philippe De Donder and Jean Marie Lozachmeur
''Tax enforcement may decrease government revenue''
( 2009, Vol. 29 No.4 )
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 enforcement, tax evasion, imperfect competition, government revenue.
JEL: H3 - Fiscal Policies and Behavior of Economic Agents: General
D4 - Market Structure and Pricing: General
Manuscript Received : Oct 13 2009 Manuscript Accepted : Oct 25 2009

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