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International Monetary Fund. Fiscal Affairs Dept.
This report presents estimates of the tax gap for Finland for the period 2008–14. There are two main components to the RA-GAP methodology for estimating the VAT gap: 1) estimate the potential VAT collections for a given period; and 2) determine the accrued VAT collections for that period. The difference between the two values is the VAT gap. The methodology employs a top-down approach for estimating the potential VAT base, using statistical data on value-added generated in each sector and constructs the accrued VAT collections value from tax record data. One of the main purposes of this report is to estimate the compliance gap. The compliance gap is the difference between the potential VAT that could have been collected given the current policy framework and actual accrued VAT collections. Other tax gap measures can be determined using different methods for determining potential VAT, and these other measures are important in understanding all the factors which are affecting current collections. This report will provide estimates for these other gap measures as well, and compare and contrast them with the compliance gap.
Ms. Li Liu, Mr. Ben Lockwood, Miguel Almunia, and Eddy H.F. Tam
Using administrative tax records for UK businesses, we document both bunching in annual turnover below the VAT registration threshold and persistent voluntary registration by almost half of the firms below the threshold. We develop a conceptual framework that can simultaneously explain these two apparently conflicting facts. The framework also predicts that higher intermediate input shares, lower product-market competition and a lower share of business to consumer (B2C) sales lead to voluntary registration. The predictions are exactly the opposite for bunching. We test the theory using linked VAT and corporation tax records from 2004-2014, finding empirical support for these predictions.
Mr. David C Nellor and Mr. Ronald T. McMorran
This paper provides a framework for examining environment taxes. It reviews the theoretical efficiency of three types of environment taxes: taxes on emissions or Pigouvian taxes; taxes on productive inputs or consumer goods whose use is related to environmental damage; and environment-related provisions in other taxes. A survey of environment taxes in 42 countries--drawn from developing countries, economies in transition, and industrial countries--illustrates that the use of environment taxes differs dramatically from the recommendations of environment tax theory. This divergence between the theory and practice of environment taxes can be attributed to several factors; environment taxes are difficult to implement, there are many factors that impede their effectiveness, and their introduction may be discouraged by their implications for other policy objectives.