The Reverse Method: An Indirect VAT Compliance Gap Estimation Technique

Patricio Barra and Polina Prokof'yeva

No 2025/015, IMF Technical Notes and Manuals from International Monetary Fund

Abstract: This technical note presents the Reverse Method, a novel indirect approach for estimating the global value-added tax (VAT) compliance gap. The Reverse Method leverages public datasets and a calibrated econometric model to produce scalable, comparable, and indicative VAT gap estimates for over 100 countries and multiple years. It builds on the IMF’s RA-GAP (Revenue Administration Gap Analysis Program) framework, using C-efficiency, tax expenditure data, and national accounts to approximate the compliance gap as a residual. The methodology enables broad cross-country analysis, supports tax gap benchmarking, and provides indicative estimates even where detailed data is scarce. While not a substitute for country-specific RA-GAP assessments, the Reverse Method offers a practical tool for monitoring global VAT compliance trends, informing tax gap analysis, and facilitating international comparisons. Its results highlight differences by income level and region, and the approach is designed for continuous improvement as more data becomes available.

Keywords: IMF Library; Ra-Gap assessment; views ofthe IMF; views of the IMF; c-efficiency EME; Global; Middle East and Central Asia; Asia and Pacific; Middle East; Western Hemisphere; Central Asia; Africa (search for similar items in EconPapers)
Pages: 33
Date: 2025-12-23
New Economics Papers: this item is included in nep-acc
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