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Prof. Maule on Strategies for Closing the Tax Gap

1 min readBy: Andrew Chamberlain

Villanova’s always-interesting Prof. James Maule has a thoughtful post on strategies for addressing the so-called federal “tax gapThe tax gap is the difference between taxes legally owed and taxes collected. The gross tax gap in the U.S. accounts for at least 1 billion in lost revenue each year, according to the latest estimate by the IRS (2011 to 2013), suggesting a voluntary taxpayer compliance rate of 83.6 percent. The net tax gap is calculated by subtracting late tax collections from the gross tax gap: from 2011 to 2013, the average net gap was around 1 billion. .” He boils down 28 years of experience teaching taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. law into six basic ways Congress can make the U.S. tax code do its job better, ranging from tax education to tax simplification.

Here are his thoughts on the relationship between tax compliance and the complexity of the federal tax code—something we’ve often pointed out in the past:

Tax simplification is essential if rates of noncompliance are to be reduced. There is a direct correlation between noncompliance and complexity. As the tax law becomes more complicated, the ability of taxpayers to comply decreases. Even tax professionals who have every wish to keep their clients’ planning and return filing within the bounds of excellent compliance struggle with the rapidity of change, the dearth of guidance on many issues, and the numerous questions arising from the interaction of multiple provisions. The opportunities for tax simplification are easy to identify, and have been addressed by many commentators during the past decade. At this stage of analysis, the specifics do not matter as much as establishing a commitment to simplification as part of the effort to improve tax compliance.

Read the full post here. For more on tax compliance and complexity, check out our “Compliance Costs and Tax Complexity” section.