Tax Administration

IRS' Tax Gap Studies Gao ID: GGD-88-66BR March 25, 1988

Pursuant to a congressional request, GAO provided information on the Internal Revenue Service's (IRS) studies on the tax gap, defined as the difference between the amount of income taxes individuals and businesses voluntarily pay and the amount of income taxes individuals and businesses actually owe.

GAO found that the IRS 1988 tax gap study differed from its 1983 study in that it: (1) excluded tax estimates for illegal source income and remittance problems; (2) changed the method for computing taxes on unreported income; and (3) assumed that compliance rates will remain constant. GAO also found that the 1988 study indicated that the tax gap: (1) estimates were much higher in 1987 than in 1973; (2) decreased from 1986 to 1987; and (3) will continue to increase from 1987 through 1992.



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