ABSTRACT
A tax gap is the difference between the amount of tax revenue that should be collected and the amount actually collected by tax regulators in each jurisdiction – for example, the United States Internal Revenue Service (IRS). An important consideration in the creation and maintenance of trust in traditional and digital economies is the way that regulators respond to changing operating modes of particular marketplaces. The development of a digital economy enables companies to avoid tax through aggressive tax planning and complicated financial arrangements. The cost borne globally of hiding money in digital economies is significant. National tax laws have not kept pace with the globalisation of corporations and the digital economy; accordingly, they have left significant legal gaps that can be exploited by multi-national corporations to artificially reduce their taxes. Rapid changes in the economy, society and technology mean the issues driving tax gaps continue to evolve.
