Tax Gap Widens

The “tax gap” is the spread between what the government thinks it should collect in taxes and what it actually collects. In 2001, the tax gap, after enforcement activities, was $290 billion. In 2006, the most recent year for statistics, the tax gap grew to $385 billion.

Compliance with tax laws has declined. In 2001, compliance was at 86.3%. In 2006, compliance declined to 85.5%. Compliance is highest when there are third-party information returns. For example, compliance with wage reporting is at 99% because employers issue Form W-2 to employees.

Source: IR-2012-4