Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

2 Issues per year


IMPACT FACTOR 2016: 0.229
5-year IMPACT FACTOR: 0.271

CiteScore 2016: 0.30

SCImago Journal Rank (SJR) 2016: 0.398
Source Normalized Impact per Paper (SNIP) 2016: 0.232

Mathematical Citation Quotient (MCQ) 2016: 0.08

Online
ISSN
1935-1704
See all formats and pricing
More options …

Profit Tax Evasion under Wage Bargaining Structure

T.C. Michael Wu
Published Online: 2016-05-17 | DOI: https://doi.org/10.1515/bejte-2014-0090

Abstract

This paper deals with the neutrality of profit taxes levied on firms as well as the implications of tax evasion in economies with right-to-manage wage formation and efficient bargaining, respectively. Contrary to the outcome under competitive labor markets, we show that profit taxes are not neutral and the firm’s tax evasion decision is not separable from its production decision under right-to-manage wage formation, where a trade union and firm bargain over the wage rate (except in the special case of a monopoly union). A similar conclusion follows from an efficient bargaining model, where a trade union and firm bargain over both the wage rate and employment. In addition, wage bargaining plays an important role in determining the optimal profit tax and the enforcement policy.

Keywords: profit tax evasion; separability; wage bargaining

JEL: D8; H25; H26

References

  • Aronsson, T. 2005. “Environmental Policy, Efficient Taxation and Unemployment.” International Tax and Public Finance 12:131–44.CrossrefGoogle Scholar

  • Aronsson, T., and S. Blomquist. 2003. “Optimal Taxation, Global Externalities and Labor Mobility.” Journal of Public Economics 87:2749–64.CrossrefGoogle Scholar

  • Aronsson, T., and T. Sjögren. 2004. “Efficient Taxation, Wage Bargaining and Policy Coordination.” Journal of Public Economics 88:2711–25.CrossrefGoogle Scholar

  • Baumann, F., and T. Friehe. 2010. “Tax Evasion, Investment, and Firm Activity.” FinanzArchiv: Public Finance Analysis 66:1–14.CrossrefGoogle Scholar

  • Bayer, R., and F. Cowell. 2009. “Tax Compliance and Firms’ Strategic Interdependence.” Journal of Public Economics 93:1131–43.Web of ScienceCrossrefGoogle Scholar

  • Bigio, S., and E. Zilberman. 2011. “Optimal Self-Employment Income Tax Enforcement.” Journal of Public Economics 95:1021–35.CrossrefWeb of ScienceGoogle Scholar

  • Blomquist, S., and L. Micheletto. 2006. “Optimal Redistributive Taxation When Government’s and Agents’ Preferences Differ.” Journal of Public Economics 90:1215–33.CrossrefGoogle Scholar

  • Cahuc, P., F. Postel-Vinay, and J. M. Robin. 2006. “Wage Bargaining with on-the-Job Search: Theory and Evidence.” Econometrica 74:323–64.CrossrefGoogle Scholar

  • Cremer, H., and F. Gahvari. 1993. “Tax Evasion and Optimal Commodity Taxation.” Journal of Public Economics 50:261–75.CrossrefGoogle Scholar

  • Danthine, J. P., and J. Hunt. 1994. “Wage Bargaining Structure, Employment and Economic Integration.” Economic Journal 104:528–41.CrossrefGoogle Scholar

  • Goerke, L. 1996. “Taxes on Payroll, Revenues and Profits in Three Models of Collective Bargaining.” Scottish Journal of Political Economy 43:549–65.CrossrefGoogle Scholar

  • Goerke, L. 1998. “Privatization and Efficiency Wages.” Journal of Economics 67:243–64.CrossrefGoogle Scholar

  • Goerke, L. 2003. “Income Tax Evasion in a Unionised Labour Market.” Australian Economic Papers 42:135–48.CrossrefGoogle Scholar

  • Goerke, L., and M. Runkel. 2006. “Profit Tax Evasion Under Oligopoly with Endogenous Market Structure.” National Tax Journal 59:851–7.CrossrefGoogle Scholar

  • Goerke, L., and M. Runkel. 2011. “Tax Evasion and Competition.” Scottish Journal of Political Economy 58:711–36.CrossrefWeb of ScienceGoogle Scholar

  • Grandner, T. 2006. “A Note on Franchising and Wage Bargaining.” Journal of Economics 87:281–93.CrossrefGoogle Scholar

  • Haskel, J., and A. Sanchis. 1995. “Privatisation and X-Inefficiency: A Bargaining Approach.” Journal of Industrial Economics 43:301–21.CrossrefGoogle Scholar

  • Hashimzade, N., Z. Huang, and G. D. Myles. 2010. “Tax Fraud by Firms and Optimal Auditing.” International Review of Law and Economics 30:10–17.CrossrefWeb of ScienceGoogle Scholar

  • Kennan, J. 2010. “Private Information, Wage Bargaining and Employment Flutuations.” Review of Economic Studies 77:633–64.CrossrefGoogle Scholar

  • Koskela, E., and R. Schöb. 1999. “Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining?” Economics Letters 64:343–9.CrossrefGoogle Scholar

  • Layard, R., and S. Nickell. 1990. “Is Unemployment Lower if Unions Bargain Over Employment?” Quarterly Journal of Economics 105:773–87.CrossrefGoogle Scholar

  • Lee, K. 1998. “Tax Evasion, Monopoly, and Nonneutral Profit Taxes.” National Tax Journal 51:333–8.Google Scholar

  • Lockwood, B. 1990. “Tax Incidence, Market Power, and Bargaining Structure.” Oxford Economic Papers 42:187–209.CrossrefGoogle Scholar

  • Marrelli, M. 1984. “On Indirect Tax Evasion.” Journal of Public Economics 25:181–96.Web of ScienceCrossrefGoogle Scholar

  • Marrelli, M., and R. Martina. 1988. “Tax Evasion and Strategic Behaviour of the Firms.” Journal of Public Economics 37:55–69.CrossrefGoogle Scholar

  • McDonald, I. M., and R. M. Solow. 1981. “Wage Bargaining and Employment.” American Economic Review 71:896–908.Google Scholar

  • Micheletto, L. 2008. “Redistribution and Optimal Mixed Taxation in the Presence of Consumption Externalities.” Journal of Public Economics 92:2262–74.CrossrefWeb of ScienceGoogle Scholar

  • Nash, J. F.Jr. 1950. “The Bargaining Problem.” Econometrica 18:155–62.CrossrefGoogle Scholar

  • Panteghini, P. M. 2000. “Tax Evasion and Entrepreneurial Flexibility.” Public Finance Review 28:199–209.CrossrefGoogle Scholar

  • Pirttilä, J., and M. Tuomala. 1997. “Income Tax, Commodity Tax and Environmental Policy.” International Tax and Public Finance 4:379–93.CrossrefGoogle Scholar

  • Virmani, A. 1989. “Indirect Tax Evasion and Production Efficiency.” Journal of Public Economics 39:223–37.CrossrefGoogle Scholar

  • Wang, L. F. S., and J. L. Conant. 1988. “Corporate Tax Evasion and Output Decisions of the Uncertain Monopolist.” National Tax Journal 41:579–81.Google Scholar

  • Wu, M. T. C., and C. C. Yang. 2011. “Monopolists’ Profit Tax Evasion Revisited: When Firms Have Objectives Other Than Maximizing Profit.” Public Finance Review 39:831–40.CrossrefGoogle Scholar

  • Yaniv, G. 1995. “A Note on the Tax Evading Firm.” National Tax Journal 48:113–20.Google Scholar

  • Yitzhaki, S. 1974. “A Note on Income Tax Evasion: A Theoretical Analysis.” Journal of Public Economics 3:201–2.CrossrefGoogle Scholar

About the article

Published Online: 2016-05-17

Published in Print: 2016-06-01


I gratefully acknowledges the financial support by Ministry of Science and Technology, Taiwan, under grant NSC 101-2410-H-035-010. The usual disclaimer applies.


Citation Information: The B.E. Journal of Theoretical Economics, ISSN (Online) 1935-1704, ISSN (Print) 2194-6124, DOI: https://doi.org/10.1515/bejte-2014-0090.

Export Citation

©2016 by De Gruyter. Copyright Clearance Center

Citing Articles

Here you can find all Crossref-listed publications in which this article is cited. If you would like to receive automatic email messages as soon as this article is cited in other publications, simply activate the “Citation Alert” on the top of this page.

[1]
Māris Jurušs
Economics and Business, 2017, Volume 30, Number 1

Comments (0)

Please log in or register to comment.
Log in