Author
Listed:
- Konrad Raczkowski
- Bogdan Mróz
Abstract
Purpose - The purpose of this paper is to present an up-to-date estimation of the tax gaps (TGs) of 35 countries (28 EU member states and 7 additional countries – Australia, Canada, Japan, New Zealand, Turkey, Switzerland and the USA, both as a percentage of the gross domestic product (GDP) and a nominal value (in US$). Design/methodology/approach - The authors’ empirical study was carried out on 35 selected countries. To estimate the TG, indirect methodology has been applied, where the basic components used in the estimation procedure are the level of the shadow economy estimated with the multiple indicators multiple causes method, the GDP at current prices (in US$), the total tax rate (TTR) of a given country and the indirect method of follow-up and estimation of lacking data. Findings - The basic finding of the research is that the level of the TG is determined individually for a given country and is strongly correlated with the GDP, i.e. if the GDP is high, the TG as the percentage of the GDP is lower in the majority of countries. It is particularly easily noticeable in countries such as the USA (TG – 3.8 per cent of the GDP), the Great Britain (TG – 3.2 per cent of the GDP) or Japan (TG – 4.3 per cent of the GDP). Research limitations/implications - A limitation of the adopted research method is the lack of application of direct (supplementary) methods which would include potentially lost contributions from foreign sources and not registered taxpayers. Another research constraint is that the authors’ estimations do not take into account the so-called direct top-down approach based on the VAT Theoretical Total Liability. The weakness of the adopted procedure of estimation is also the use of TTR only instead of comparative approach including tax burdens and average tax rate. Practical implications - TG has recently become a hotly debated issue and poses a big challenge to the public finance in many countries. The paper provides some recommendations for the policymakers how to reduce the size of the TG. Social implications - Tax evasion and tax avoidance leading to the emergence and expansion of the TG erode the business ethics and distort the rules of fair competition, thus undermining the social trust and moral infrastructure of business transactions. Originality/value - One of the major research findings is that 30 per cent of the TG in a given country is determined by the TTR, which – for the first time – provides empirical proof that tax policy (as part of overall economic policy) plays an important role and that it may determine the fiscal effectiveness of a given country.
Suggested Citation
Konrad Raczkowski & Bogdan Mróz, 2018.
"Tax gap in the global economy,"
Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 21(4), pages 567-583, October.
Handle:
RePEc:eme:jmlcpp:jmlc-12-2017-0072
DOI: 10.1108/JMLC-12-2017-0072
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Cited by:
- Prianto Budi Saptono & Gustofan Mahmud & Intan Pratiwi & Dwi Purwanto & Ismail Khozen & Lambang Wiji Imantoro & Maria Eurelia Wayan, 2024.
"Book-Tax Differences during the Crisis: Does Corporate Social Responsibility Matter?,"
Sustainability, MDPI, vol. 16(17), pages 1-38, August.
- Diana Falsetta & Jennifer K. Schafer & George T. Tsakumis, 2024.
"How Government Spending Impacts Tax Compliance,"
Journal of Business Ethics, Springer, vol. 190(2), pages 513-530, March.
- Bogdan Amzuica & Roxana Adriana Mititelu, 2023.
"The underground economy: an exploration of components, size, causes and effects,"
Technium Social Sciences Journal, Technium Science, vol. 45(1), pages 168-182, July.
More about this item
Keywords
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JEL classification:
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
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