Bureaucratic Corruption and Profit Tax Evasion

Firms may evade taxes on profits and can also avoid fulfilling legal restrictions on production activities by bribing bureaucrats. It is shown that the existence of tax evasion does not affect corruption activities at the firm level, while the budgetary repercussions of tax evasion induce less corruption. Policy measures which alter the gains or losses from corruption have a non-systematic impact on tax evasion behaviour.