An Overview of the 'Tax Gap'
Georgetown University Law Center
September 5, 2008
Georgetown Law and Economics Research Paper No. 1162493
Taxes - The Tax Magazine, November 2008
Georgetown Public Law Research Paper No. 1162493
When taxpayers underreport their income, understate their income, or fail to file their tax returns the government must spend money to audit taxpayers, to assess the tax, to collect the tax, and to borrow money to cover the lost revenue. The amount of such noncompliance with the tax laws is called the "Tax Gap" and currently it is estimated to be $345 billion annually.
This article describes the scope, the causes of, and the tools available to Congress and the IRS to close the Tax Gap. In particular, I examine the role enforcement and other methods play in closing the Tax Gap. Given the complexities involved, there is no single method that, by itself, will significantly reduce the Tax Gap. Instead, several methods - discussed herein - will need to be employed simultaneously to close the Tax Gap.
Number of Pages in PDF File: 44
Keywords: Tax, Taxation, Tax Gap
JEL Classification: H2, H20, H22, H24, H26, H29, K34, E62
Date posted: July 21, 2008 ; Last revised: October 16, 2008