1. GIFT - Tax Transparency and the Revenue Cycle
Richard Murphy
Professor of Practice in International Political Economy, City, University of London

2. The problem with the revenue cycle
The big problem with the revenue cycle is what you cannot see
Traditionally this has been called the tax gap
The tax that should be paid which is not
Calculated by only a few countries
Perhaps because admitting how much tax you do not owe is quite frightening

3. But the tax gap is itself little understood
Calculated for taxes in isolation
And often on the basis of inadequate data and methodologies

4. What the tax gap does not show as it's calculated at present
How much of the tax base is not taxed
How much of the tax base is given away in allowances and reliefs
How much of the tax gap is due to poor tax design
What the impact of tax evasion of one tax is for other taxes

5. A new approach
The tax gap needs to start from national income accounting data
And needs to estimate what tax expenditures really are
And needs to estimate tax spillovers

6. Tax spillovers
Two elements
Spillovers by design
Spillover costs

7. Tax spillovers by design
Poor design means one tax undermines another tax
Andrew Baker and I have looked at this and come up with a simple perception index to measure this risk
A tax weakened by another is scored 5
A tax that threatens another tax base is scored 1

8. The balanced tax system looks like this

9. And an unbalanced system is quite different

10. What next?
I now suggest that where risk is high it should also be possible by combining:
the economic logic of the multiplier,
some accounting theory, and
knowledge of tax rates
to use estimates from one tax base (and sales taxes are the obvious state point because they're at the top of the income account) to estimate losses in others

11. Wise use of spillover analysis
Wise use of spillover analysis is I think the best way to overcome the data shortages we face
I'm happy to discuss it