VAT Gap

The VAT gap refers to the difference between the total amount of Value Added Tax (VAT) that should be collected based on actual economic activity and the amount that is actually received by the government. It highlights the shortfall caused by tax evasion, fraud, or errors in compliance. A high VAT gap indicates significant potential revenue loss, which can impact public services and government budgets. Efforts to reduce the VAT gap involve improving tax enforcement, modernization of the tax system, and encouraging better compliance among businesses and individuals.