Original article History of Economic Thought, Methodology, and Heterodox Approaches

THE CONCEPT OF TAX GAP: ESSENCE, DEFINITION, TYPES, COMPONENTS, METHODS, INTERNATIONAL PRACTICES AND CHALLENGES IN ITS MEASUREMENT

Yonko Yotov - UNWE, National Revenue Agency, Bulgaria
Received: 06 Dec 2025
Revised:
Published:
Downloads: 0
Citations: 0
Book 4/2025
JEL H25 E26 H26
DOI https://doi.org/10.56497/etj2570407

Abstract

The tax gap, also referred to as a tax ‘difference’, ‘mismatch’, ‘emptiness’, ‘omission’, ‘hole’, ‘deficit’, ‘shortage’, ‘loss’ or ‘damage’, represents the amount of tax revenue lost or foregone. It is the difference between the potential and actual revenue collected. More specifically, it is the difference between the amount of tax that could theoretically be collected if all taxpayers fulfilled their tax obligations by voluntarily submitting complete and accurate tax returns and paying the taxes due, compared to the current, or hypothetically most extensive, tax legislation, and the amount of actual collected tax over a specific period. This article provides a literary overview of the ‘tax gap’ concept and issues related to it, as well as theoretical and practical insights related to its nature, components, and methods and practices used for measurement in some advanced countries and in Bulgaria. Statistical data are also presented along with results from a survey conducted in December 2024 and January 2025 among experts in the field of financial control in Bulgaria working at the National Revenue Agency (NRA) and the Customs Agency, as well as university lecturers in finance and accounting. The author’s insights are intended for experts from revenue organisations and can also be useful to scientific and business analysts more broadly.

How to cite this article

Yotov, Y. (2025). The Concept of Tax Gap: Essence, Definition, Types, Components, Methods, International Practices and Challenges in its Measurement. Economic Thought Journal, 70 (4), 535-566. https://doi.org/10.56497/etj2570407

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