Rewarding the consumer for curbing the evasion of commodity taxes?.

Monetary or in-kind transfers can be used as an incentive for consumers to request o.cial receipts for goods they purchase. A novel system of in-kind transfers in the form of lottery tickets has recently been introduced in China. Price subsidies (often granted through tax deductions or refunds) are also widely used. This paper extends the standard model of commodity tax evasion for firms (in a competitive market and under the conjectural variation approach) in order to describe the e.ects of subsidies on tax evasion and in terms of incidence and of government revenue. The role of search costs and of enforcement costs is also taken into account.