The Role of Effective Governance in Narrowing the Tax Gap

A Theoretical Approach

Abstract

The paper analyses the intrinsic relation between tax policy, tax structure and the tax administration. Without strategic tax administration mechanism, tax policy and tax structure how strongly be built in, may not help achieving the intended output. The study of the environment is essential for successful tax administration. Tax collection is considered as a production process with the environment as one of the inputs in the said process for tax revenue as output. The paper highlights the causes and consequences of the tax gap and the various indicators for understanding the tax gap. A three-pronged approach i.e. policy, structure and strategic fit administrative set up to handle, interpret, and implement them with efficiency and effectiveness without dislocation of allocation of resources is crucial enhancement of tax compliance.