Measuring the tax gap

Title	Overview	Status
Tax gap measurement: Approaches and outcomes	The Research Centre is also leading several ongoing projects with tax authorities focused on measuring and understanding the tax gap. These initiatives combine detailed administrative data with robust analytical frameworks to quantify compliance risks, identify structural drivers of under-reporting, and assess the effectiveness of policy and enforcement interventions. Working collaboratively with partner administrations, the Centre provides technical support on both top-down and bottom-up estimation approaches, develops tools to monitor trends over time, and helps integrate tax-gap analysis into strategic planning and operational decision-making. This work contributes directly to strengthening evidence-based compliance management and enhancing the overall effectiveness of tax administration.	Ongoing
Self-employment Underreporting in the UK	UK tax administration (HMRC) has faced public demand for more efficient service delivery and greater accountability. Driving much of this is the existence of the “tax gap” – defined as the difference between the amount of tax due to the Exchequer and the amount actually collected in any given year. Historically, widespread evidence of self-employment underreporting has been found in tax audits and empirical studies Conclusions: Non-compliance by self-employed households (more than 25% of income from self-employment) is estimated to be on average 28%. The link between the estimated income-gap and underreporting was investigated by testing other alternative explanations of the gap. The gap cannot be explained by differing preferences between the two groups, including savings behaviours, financial constraints and measurement error. Self-Employment underreporting varies by sex, age, and region which helps inform about the factors that correlate with non-compliance. The results are consistent with the behaviours found in previous studies, experiments and research conducted using audit data. (See also Discussion Papers 010 - 14 and 014 - 15).	Completed

Title

Overview

Status

Tax gap measurement: Approaches and outcomes

The Research Centre is also leading several ongoing projects with tax authorities focused on measuring and understanding the tax gap. These initiatives combine detailed administrative data with robust analytical frameworks to quantify compliance risks, identify structural drivers of under-reporting, and assess the effectiveness of policy and enforcement interventions. Working collaboratively with partner administrations, the Centre provides technical support on both top-down and bottom-up estimation approaches, develops tools to monitor trends over time, and helps integrate tax-gap analysis into strategic planning and operational decision-making. This work contributes directly to strengthening evidence-based compliance management and enhancing the overall effectiveness of tax administration.

Ongoing

Self-employment Underreporting in the UK

UK tax administration (HMRC) has faced public demand for more efficient service delivery and greater accountability. Driving much of this is the existence of the “tax gap” – defined as the difference between the amount of tax due to the Exchequer and the amount actually collected in any given year. Historically, widespread evidence of self-employment underreporting has been found in tax audits and empirical studies

Conclusions:

Non-compliance by self-employed households (more than 25% of income from self-employment) is estimated to be on average 28%. The link between the estimated income-gap and underreporting was investigated by testing other alternative explanations of the gap. The gap cannot be explained by differing preferences between the two groups, including savings behaviours, financial constraints and measurement error. Self-Employment underreporting varies by sex, age, and region which helps inform about the factors that correlate with non-compliance. The results are consistent with the behaviours found in previous studies, experiments and research conducted using audit data.

(See also Discussion Papers 010 - 14 and 014 - 15).

Completed