A NOTE ON THE TAX-EVADING FIRM

This note develops a general model of tax evasion applicable to any form of evasion that might be practiced by the firm. It shows that the firm's activity level is always separable from the evasion decision, that a tax rate increase must always decrease the firm's statement deviation from the true value of its tax base (or of a magnitude deductible from its tax base), and that the amount of tax evaded can never increase; at most, when the firm acts as a withholding agent, it will remain unchanged. The results are applied to the case of payroll tax evasion.