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An Overview of the 'Tax Gap'

44 Pages Posted: 21 Jul 2008 Last revised: 16 Oct 2008

Dave Rifkin

Georgetown University Law Center

Date Written: September 5, 2008

Abstract

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.

Keywords: Tax, Taxation, Tax Gap

JEL Classification: H2, H20, H22, H24, H26, H29, K34, E62

Suggested Citation

Rifkin, Dave, An Overview of the 'Tax Gap' (September 5, 2008). Georgetown Law and Economics Research Paper No. 1162493; Taxes - The Tax Magazine, November 2008; Georgetown Public Law Research Paper No. 1162493. Available at SSRN: https://ssrn.com/abstract=1162493

Dave Rifkin (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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