The Revenue Administration Gap Analysis Program:An Analytical Framework for Personal Income Tax Gap Estimation

Author: International Monetary Fund. Fiscal Affairs Dept.

Measuring lost tax revenue from noncompliance is difficult. This Note focuses on theoretical and practical ways of measuring the gap in personal income tax compliance.

Volume/Issue: Volume 2021 Issue 009

Publication date: August 2021

ISBN: 9781513577173

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Topics covered in this book

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Public Finance , Taxation - General , International Taxation , Tax Administration , Tax Compliance , Personal Income Tax , Tax Gap , Tax Avoidance , Tax Evasion , Random Audit Program , Shadow Economy , Non-Observed Economy , PIT gap , Personal Income Tax gap estimation , publication order , gap estimate , taxpayer registry data , Auditing , Revenue Administration Gap Analysis Program (RA-GAP)

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Summary

It is generally difficult to measure revenue not collected due to noncompliance, but a growing number of countries now regularly produce and publish estimated revenue losses. Good tax gap analysis enables the detection of changes in taxpayer behavior by consistent estimates over time. This Technical Note sets out the theoretical concepts for personal income tax (PIT) gap estimation, the different measurement approaches available, and their implications for the scope and presentation of statistics. The note also focuses on the practical steps for measuring the PIT gap by establishing a random audit program to collect data, and how to scale findings from the sample to the population.