Tax evasion can impact the economy in complex ways. In a model where a private agent invests in production and the government collects taxes, high costs for tax evasion can lead to lower tax revenue when tax rates increase. However, if evasion costs are low, increasing tax rates can reduce tax evasion. The efficiency of audits also plays a crucial role in these relationships. Ultimately, the level of public spending may not be optimal in this dynamic equilibrium.