Literature on tax evasion has generally ignored the effects of tax evasion by a monopolist in a regulatory environment. When the government is asymmetrically informed about the monopolist's demand and/or costs, however, the fIrm may have the opportunity to cheat on its regulatory constraint and tax payments. Adjustments in the regulatory constraint then will directly impact on the tax revenues of the government while alterations in tax policies may alter the effectiveness and efficiency results of a particular regulatory policy. To analyze these issues two forms of regulation, a price ceiling regulation and a fixed profit per unit regulation are considered in an environment where the government is incompletely informed about the monopolist's cost function. For the price ceiling regulation (Chapter 2) it is shown that tax evasion decisions are affected by variations in the ceiling in the sense that an increase in the effective price ceiling results in misreporting by a larger proportion. Tax evasion decisions however are found not to affect output decisions of the monopolist. Thus the optimal price ceiling under evasion is set at the same level as without tax evasion, i.e., at the point where price equals expected marginal cost. Optimality in this economy can be achieved in a number of ways. Full compliance is one way but optimality can also be achieved with tax evasion. When the form of regulation considered is a fixed profit-per-unit regulation (Chapter 3), the results are quite different from above. Because profits of the monopolist are not costlessly observable by the government, fIrms can cheat on the regulatory constraint itself. Thus output and tax evasion to affect the monopolist's output. Literature on tax evasion has often neglected the fact that income from different sources is taxed at different rates and provides different opportunities for misreporting. Once an individual obtains certain skills, his flexibility in switching jobs to evade taxes on his wage income becomes limited. Also the fact that a large part of the wage income in the U.S. is reported to the government by the employer and often withheld at the source, greatly limits the opportunity for evading wage taxes. However an individual faces many options when deciding on how to invest his savings and the income from at least some of these may not be subject to withholding and reporting. This fact suggests that the savings of an individual can be affected by tax evading opportunities. Chapter 4 examines this problem by considering a dynamic model of tax evasion. The results show that an increase in the penalty rate or audit probability leads to an increase in savings of the individual, given some assumptions on preferences. This fact implies that savings are reduced by the possibility of tax evasion. It also suggests that savings could be increased by stricter enforcement of tax laws. Because the model used in chapter 4 is fairly complicated, some of the comparative static results are found to be ambiguous under general conditions. It is also not clear from the theory what the optimal policy of the government would be. To address these issues in more details, chapter 5 considers some numerical exercises. A number of results emerge from these exercises. First, savings are found to increase with an increase in either the penalty rate or the audit rate, even when the restrictive assumptions on risk aversion do not hold and labor supply is variable. Second, full compliance seems to be the optimal policy of the government for the specification selected. These results seem to hold both for compensated and uncompensated taxes. / Ph. D.