Can the Tax Gap be a Useful Tool in Terms of Tax Performance?
Can the Tax Gap be a Useful Tool in Terms of Tax Performance?

Summary/Abstract: The tax gap can be defined as the difference between the effective taxes collected and those which would be collected under full compliance. By estimating the tax gap, it is possible to obtain relevant information about the degree of compliance and its components for a specific tax or for the tax system as a whole, including its evolution over time. This information can be essential for tax administrations when deciding how to allocate their resources to improve tax compliance. Consequently, it can be a useful tool for measuring fiscal performance, as it can provide insight into the effectiveness of a government's tax collection efforts. The fiscal impacts of compliance or noncompliance are of critical interest, not just to tax administrations, but also to other stakeholders, and a growing number of countries now regularly produce and publish estimated revenue losses due to non-compliance. A good tax gap analysis enables the detection of changes in taxpayer behaviour by consistent estimates over time.

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