Volume 34, Issue 69 (2026)
J Tax Res 2026, 34(69): 0-0 |
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Shoorideh M, Nematy M, Fadaee M. Estimation of the Value-Added Tax Gap in Iran. J Tax Res 2026; 34 (69)
URL: http://taxjournal.ir/article-1-2513-en.html
URL: http://taxjournal.ir/article-1-2513-en.html
1- , M.Shoorideh@isu.ac.ir
Abstract: (217 Views)
Enhancing tax revenues and reducing reliance on oil-derived income remain central to Iran’s fiscal sustainability strategy. In this context, combating tax evasion and reforming tax exemptions are critical measures. The tax gap—defined as the difference between potential and actual tax revenues—serves as a key indicator for evaluating the efficiency of tax administration and the extent to which a country utilizes its tax capacity. The VAT gap is typically decomposed into two main components: the policy gap, reflecting revenue losses due to tax policy choices such as exemptions and reduced rates, and the compliance gap, representing revenue losses due to non-compliance with existing tax laws. This study aims to estimate the policy and compliance components of the Value-Added Tax (VAT) gap in Iran over the course of the 1390s (corresponding to the 2010s in the Gregorian calendar). Employing a sectoral approach—a recognized macro-level methodology for VAT gap estimation—and utilizing an updated 75×75 input-output table, this research provides a comprehensive assessment of VAT inefficiencies across economic sectors. The findings indicate a persistent and widening gap in both policy and compliance dimensions throughout the decade. When including VAT surcharges (which encompass both government and municipal shares), the compliance and policy gaps were estimated at 43.6% and 41.8%, respectively, in 1390 (2011), increasing to 57.0% and 42.5% in 1399 (2020). When excluding surcharges and focusing solely on the central government's share, the compliance gap rose from 50.4% in 1390 to 64.4% in 1399, while the policy gap increased from 23.1% to 26.5% over the same period. The study concludes by recommending that the Iranian National Tax Administration (INTA) institutionalize the annual estimation of the VAT gap, disaggregated into policy and compliance components. This would strengthen fiscal transparency, improve policy evaluation, and support evidence-based reforms aimed at enhancing revenue mobilization and tax system efficiency.
Keywords: VAT Compliance Gap, VAT Policy Gap, Potential VAT Capacity, Statutory VAT Capacity, Input-Output Table
Type of Study: Applicable |
Subject:
Economic
Received: 2025/07/14 | Accepted: 2025/11/23 | Published: 2026/05/31
Received: 2025/07/14 | Accepted: 2025/11/23 | Published: 2026/05/31
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