Technical Notes and Manuals

Using Top-Down Compliance Gap Techniques to Supplement the Compliance Risk Management Framework

By Elena D'Agosto, Michael A Hardy, Stefano Pisani, Anthony Siouclis

January 24, 2025

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Elena D'Agosto, Michael A Hardy, Stefano Pisani, and Anthony Siouclis. "Using Top-Down Compliance Gap Techniques to Supplement the Compliance Risk Management Framework", Technical Notes and Manuals 2025, 003 (2025), accessed April 1, 2025, https://doi.org/10.5089/9798400291555.005

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Disclaimer: This Technical Guidance Note should not be reported as representing the views of the IMF. The views expressed in this Note are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Traditional top-down tax gap assessments identify the size of a tax gap, but not its origins. By extracting more granular information from top-down tax gap assessments, and combining this information with compliance risk management (CRM) techniques, it is possible to: improve the accuracy of CRM techniques; improve the consistency of the likelihood and consequence dimensions of compliance risk assessments; identify emerging areas of tax compliance risk and; better disaggregate the direct and indirect revenue effects of compliance interventions, including the “behavioral component” within the indirect effects. Finally, it is also possible to determine the optimal revenue recovery from each segment of the taxpayer population.

Subject: Auditing, Public financial management (PFM), Revenue administration, Revenue performance assessment, Tax gap, Tax return filing compliance, Taxes, Value-added tax

Keywords: Auditing, Compliance gap, Compliance gap technique, Compliance index, Compliance Risk Management, Compliance risk-management framework, CRM, Direct revenue effect, IMF Library, Indirect revenue effect, Tax administration, Tax compliance, Tax gap, Tax return filing compliance, Taxpayer behavioral component, Taxpayer compliance, Value-added tax

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