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Publication Detail
TRJ 2006 Vol XVIII No 6a: Estimate of the Individual Income Tax Gap

he individual income tax gap or leakage from 2001 to 2005 averaged P 35.74 billion annually. Of this amount, P 9.65 billion or 27% came from compensation income earners while P 26.09 billion or 73% came from professionals and self-employed individuals. Relative to the average potential tax revenue, business and professional income scored a high tax gap of 67.5% while compensation income posted a lower tax gap of 10.9% during the period. The positive performance of the income tax system can be attributed to the untiring efforts of the Bureau of Internal Revenue to improve collection. Programs to effectively detect and eliminate revenue leakages are strengthened and intensified through the use of the Third Party Information/Enforcement and delinquent accounts management, among others. Considering however, the magnitude of the estimated tax leakage, there is still much room to improve tax collection through continuous efforts to audit and detect non-reporting of second, third, etc. employment income of certain individuals; fictitious claims of personal and additional exemptions; invalid claims of health insurance premium deduction; under-declaration of business/professional income and/or overstatement of expenses; non-filing of returns among self-employed individuals and professionals; non-remittance of withholding tax by employers/withholding agents; and, abuses in the availment of tax exemptions/ tax incentives. It is also imperative that an accurate database on the names and other required information of individual taxpayers be developed and regularly updated as the starting point for tax enforcement. Without an accurate taxpayer roll, tax enforcement and taxpayer compliance will be severely constrained.

National Tax Research Center
Authors Keywords
National Tax Research Center; tax gap; income tax;
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Published in 2006 and available in the NTRC or Downloaded 173 times since November 25, 2011
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