Page 2 - Working Paper (Narrowing Tax Gap: Cross Countries Experience)
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Narrowing Tax Gap:

                                                                   Cross Countries Experience

                   Adri Poesoro   1

                   This  paper reviews methodologies  and                     TABLE OF CONTENTS
                   empirical estimations of cross-countries’
                   tax  gap  and tax  effort. Tax  gap  is the
                   different between the maximum amounts
                   of  tax revenue to  the actual  receipt.
                                                                            1.  Introduction ............  3
                   Meanwhile,  tax  effort  is  defined  as  an
                   index of ratio between the share of the
                                                                            2.  The Cause of the
                   actual collection in gross domestic product
                                                                               Tax Gap ....................  4
                   (GDP) and taxable capacity.

                                                                            3.  Tax Capacity
                   Several  variables,  such  as  demographic,
                                                                               and Tax Effort:
                   structure of the economy and institutional
                   variables, are included as determinant                      Studies ....................  6
                   to  actual  tax-to-GDP  and  as  factors  to
                   measure tax  capacity. This  analysis
                                                                            4.  Overview of
                   also  incorporates review and policy                        Indonesia’s Tax
                   recommendation  on  how to  contain
                                                                               Performance ............ 11
                   shadow economy problems.

                                                                            5.  Conclusion
                   As part  of to inform current  level  of tax
                                                                               and Policy
                   capacity  and effort across  regions,  this                 Recommendations .. 13
                   paper also provides  recommendations
                   and strategies to narrow the gap.

                   1 Adri A. L. Poesoro is a Chief Economist, DANNY DARUSSALAM Tax
                   Center and a Doctoral graduate from Claremont Graduate University,


                   The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
                   entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate
                   as of the date received or that it will continue to be accurate in the future. The author’s views expressed in this Working Paper do not
                   necessarily reflect of the views of DANNY DARUSSLAM Tax Center. Working Papers describe research in progress by the authors and are
                   published to elicit comments and to further debate.
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