IMF’s Reverse Method: Estimating Global VAT Compliance Gaps Without Costly Audits Across 111 Countries

• The IMF and IFC have introduced the Reverse Method as a low-cost, indirect way to estimate VAT compliance gaps globally, reversing the traditional C-efficiency framework.
• This method was applied to 111 countries from 2010–2023, revealing gradual improvements in VAT compliance in advanced and low-income economies, but stagnation in emerging markets.
• The Reverse Method estimates compliance gaps by starting with observed C-efficiency and policy gap estimates, then calculating the compliance gap as the unexplained portion.
• The approach uses publicly available data, breaking the policy gap into tax expenditure and nontaxable goods/services gaps, making it practical for global monitoring and comparison.

Source: devdiscourse.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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