In 2005, the average tax revenue to GDP ratio in the developed world was around 35%. In developing countries, it was 15%. Tax avoidance and evasion are widely believed to be important factors limiting revenue in these countries. This research project, commissioned by the UK Department for International Development, reviewed existing empirical estimates of tax revenue losses due to tax avoidance and tax evasion in developing countries. The study concluded that the available knowledge on such losses is very limited, partly due to the lack of data and partly due to methodological shortcomings of existing studies. Some estimates systematically overestimate revenue losses: others are based on assumptions which are so restrictive that the results are difficult to interpret. More research is needed to improve our understanding of these issues, and the project proposes several new directions for future research.
Clemens Fuest, Nadine Riedel