Eliminating tax fraud is an utopia or can it become reality? This week the Barcelona School of Management of Pompeu Fabra University organized a paper to address this issue with Joan Iglesias, partner of Roca Junyent, to talk about what we talk about what is tax fraud and how to reduce it.
The main indicator to measure the correct functioning of a tax system is the so-called "Tax Gap." This indicator measures the difference between the potential revenue from a tax system and its actual collection. In Spain, this key indicator is not calculated. In countries like the United Kingdom (see image below) or Australia there is a long tradition of calculating the Tax Gap. In the case of Catalonia, the Tax Agency of Catalonia (ATC) calculated the year 2017 its Tax Gap.
In Spain, the Tax Gap is not used to measure the efficiency of a tax system, but other indicators are used to measure it, such as the money recovered by the tax authorities through its actions.
The money recovered by the Tax Agency only represents a small part of the difference between the potential collection of a state and the actual collection. There are other factors besides tax evasion that influence the fact that all the money that theoretically could be raised, such as errors or negligence on the part of the taxpayers, lack of economic resources, lack of knowledge, difficulty of the tax system, the fiscal elusion or the submerged economy.
Finally, Joan Iglesias set out his point of view on how to reduce the Tax Gap in Spain: According to this lawyer, it must be done through the cooperation of citizenship, which is achieved through incentives, as it happens, for example, in Australia. For Iglesias, Australia is an exemplary country in its tax efficiency, and has an optimal fiscal gap as a result of a successful fiscal structure and good fiscal management. One of the key elements of this system is that the information of the Tax Agency is openly shared with the taxpayer, rather than monopolizing it. For Iglesias, it is necessary to focus the resources of the Tax Administration in pursuing the underground economy and tax criminals, especially those who obtain illegal money from the Tax Agency (through making false bills, for example), and not Focusing almost exclusively on the persecution of bad contributors, which is what the Tax Agency has been doing so far.
Graphic. Evolution of the tax Gap in the UK. Gov. UK