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A Macroeconomic Analysis of Corporate Tax Evasions
1 : The University of Kitakyushu
(Faculty of Economics and Business Administration)
2 : Tokyo Institute of Technology
(Department of Social Engineering)
3 : Meisei University
(Department of Economics)
* : Corresponding author
We examine whether the world trend of decreasing corporate tax rate is desirable
in view of tax evasions of firms by the theoretical and quantitative exercises. We
explore the optimal corporate taxation under endogenous tax evasions by firms in
an R&D based growth model. Using the model, we obtain the following implica-
tions. Decreasing corporate tax rate brings larger welfare cost than that in the usual
discussion where endogenous tax evasions of firms are not considered. In terms of
welfare as well as growth, corporate tax rates should not be set to low rates, for
example, 20%.
