TAX GAP AND AN ASSESSMENT OF FACTORS AFFECTING IT IN LATVIA
DOI:
https://doi.org/10.17770/jresd2024vol16.8324Keywords:
complete/partial non-disclosure of tax income, macro approach, micro approach, shadow economy, tax gap, tax revenueAbstract
Purpose and aim of the study: The purpose of the study is to analyse the theoretical aspects of the tax gap and to investigate its extent in Latvia, emphasizing the main factors affecting the tax gap concerning the shadow economy index.
Design / Methodology / Approach: The research employed the following methods: descriptive and graphic, statistical analysis, the comparison method, logical construction, and correlation analysis.
Main Findings: The results of the study showed that there was a relationship between the tax gap and the shadow economy because as the undeclared or unpaid income to the state budget (the element forming the tax gap) increases, the indicator of the shadow economy index increases. Of the factors affecting the tax gap, the quality of regulation, government efficiency, tax revenue, and gross domestic product per capita have a greater impact on it. It is important to improve tax administration procedures by promoting cooperation with taxpayers to reduce the tax gap.
Originality: The research has carried out a scientific discussion regarding components of the tax gap, calculation methods influencing factors, and performed a mutual analysis of Latvian tax gap-related indicators to identify the main causes.
Implications: Due to the tax gap, the budget does not receive revenues that could be directed to other sectors of the economy and creates competition distortions between honest and dishonest taxpayers, so it is important to study the factors influencing it and look for ways to reduce it.
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