This article revisits the issues of neutrality and separability for a monopolistic firm. It is shown that as long as the monopolistic firm has objectives other than maximizing profit, then in general: (1) profit taxes will not be neutral, and (2) the firm's production and evasion decisions will...

<link rid="b3">Andreoni, Erard, and Feinstein (1998)</link> suggest that imposing very high penalties for tax evasion is not possible under bankruptcy or limited liability constraints. In this paper, we complement their suggestion by showing that, in the presence of these constraints, imposing very high penalties can...