The concept of tax gaps. Report II, Corporate income tax gap estimation methodologies

DisplayLogo

Publications Office of the European Union

Language Selector

BasketSummary

MyPortal

Publications Office of the EU

Help

Maintenance EN

Please note that this website will be undergoing technical maintenance between 28 and 31 August. Consequently, users may experience instabilities and limited functionality. We apologise for the inconvenience.

Web Content Display (Global)

Publication Detail Actions Portlet

Utilities

Rate this publication

custom-survey-notification

Publication Detail Portlet

Publication detail

Home

EU publications

Download Order

The concept of tax gaps. Report II, Corporate income tax gap estimation methodologies

Publication metadata

The corporate income tax gap (CIT Gap) is the gap between corporate tax revenues as they “should be” collected and as they “are” collected. The gap is an indication of potential CIT revenue losses. The topic has gained in prominence in the public domain given its impact on public finances, on the level playing field between companies and on the overall tax morale. Estimating the CIT gap is therefore very relevant. It is however also very complex. This report aims at mapping different methodologies and approaches for estimating the CIT gaps and explaining their advantages and disadvantages. The report does not provide an exhaustive review of the economic literature and statistical techniques for deriving at these estimates but it provides an overview of a number of methodologies used in Member States or other jurisdictions, devised by international institutions, or presented in the literature. This report defines the CIT gap as encompassing both non-deliberate actions by taxpayers (such as errors or omissions) and deliberate actions (such as fraud, evasion and avoidance) that lead to shortfall in revenues. This report reflects the objective of the Tax Gap Project Group (TGPG) to map and share expertise and good practices. The two main approaches to estimating the tax gap – the top-down and bottom-up methods – have both advantages and disadvantages. The choice of the estimation method depends heavily on the availability of data, resources and purposes of the estimate. While the top-down methods start from macroeconomic indicators or national accounts data to estimate the CIT gap, bottom-up methods start from data obtained from individual taxpayers and extrapolate them to a wider population. There are clear complementarities between both approaches. From the findings of the report, it seems too early to identify a consensus methodology, which could be used across countries and provide for overall tax gap estimations. By providing an overview of the state-of-the-art and highlighting the strengths and weaknesses of each method, the report is nevertheless a first step to in that direction. However, the large differences in CIT systems point to the main difficulty of the exercise, which is to agree on one or more benchmarks. This makes international comparisons difficult because they depend to a large extend on the choice of the benchmark. The report also stresses that the focus should be on the trend of the results rather than on the absolute values. Currently, about ten Member States have taken steps or already estimate a CIT gap with different scopes, techniques and periodicity.

View less

Publication details
Related publications

Published: 2018-11-13
Corporate author(s): Directorate-General for Taxation and Customs Union (European Commission) , FISCALIS Tax Gap Project Group
Personal author(s): Van Mierlo, Astrid ; Pütsep, Tanel ; Nicodème, Gaëtan
Themes: Taxation
Subject: corporate finance , corporation tax , debt reduction , income , incomes policy , indebtedness , report , tax on income

PDF

ISSN 1725-7565

ISBN 978-92-79-89108-3

DOI 10.2778/83206

Catalogue number KP-AC-18-002-EN-N

Paper

ISSN 1725-7557

ISBN 978-92-79-89109-0

DOI 10.2778/570162

Catalogue number KP-AC-18-002-EN-C

PDF
ISSN 1725-7565	ISBN 978-92-79-89108-3	DOI 10.2778/83206	Catalogue number KP-AC-18-002-EN-N
Paper
ISSN 1725-7557	ISBN 978-92-79-89109-0	DOI 10.2778/570162	Catalogue number KP-AC-18-002-EN-C

Show all issues in this serial

OrderX

A4:

Available language(s):

ISSN - Footer

DisplayLogo

MainSearch

Language Selector

BasketSummary

MyPortal

Navigation Menu

Navigation Menu

Navigation Menu

Maintenance EN

Web Content Display (Global)

Publication Detail Actions Portlet

Utilities

custom-survey-notification

Publication Detail Portlet

Publication detail

The concept of tax gaps. Report II, Corporate income tax gap estimation methodologies

Publication metadata

Available languages and formats

PDF

Paper

Publication Viewer

Document viewer

The document doesn't have a viewable format at this time

Go Back Widget

survey-d1

Tools

Tools

Info corner

Info corner

About us

About us

Follow us

Follow us

Stay connected

Service Toolbar - Footer

ISSN - Footer

DisplayLogo

MainSearch

Language Selector

BasketSummary

MyPortal

Navigation Menu

Navigation Menu

Navigation Menu

Breadcrumb

Navigation Menu

AccessibilityTools

Maintenance EN

Web Content Display (Global)

Publication Detail Actions Portlet

Utilities

custom-survey-notification

Publication Detail Portlet

Publication detail

The concept of tax gaps. Report II, Corporate income tax gap estimation methodologies

Publication metadata

Available languages and formats

English (en)

PDF

Paper

Publication Viewer

Document viewer

The document doesn't have a viewable format at this time

Go Back Widget

survey-d1

Tools

Tools

Info corner

Info corner

About us

About us

Follow us

Follow us

Stay connected

Service Toolbar - Footer