Estimation of Colombia's tax gap: Proactive measures to reduce it

Abstract

Using a Structural Equation Model (sem) new evidence of the sensitivity Colombia's tax gap to tax evasion between 1970 and 2018, is here presented. While formulating three latent variables related to tax evasion: 1) macroeconomic instability (EIM), 2) non-compliance with income tax (EIRC) and 3) underground economy (ESE), the impact on public tax revenue (IPT) is shown, revealing the urgency of proposing proactive mechanisms to reduce the tax gap.