How smart choices on taxation can help close the growing fiscal gap
- Aurélie Barnay, Jonathan Davis, Jonathan Dimson, and Marco Dondi
- Nov 2019
- McKinsey & Co
- International
Basic economics provides two options for balancing the books: either increase revenues or decrease spending. This article focuses on options related to revenues and administration to improve the efficiency of collecting taxes.¹ With respect to policy, there are questions within the realm of taxation that will require consideration because the tax base upon which current policies were founded is changing. We explore the practical implications of several options. We also acknowledge the numerous consequential societal questions that are deeply entwined with tax policy, such as income inequality and the role of automation in future economic development.Understanding that the policy landscape is complex and challenging, we propose a set of actions that governments can take to fundamentally improve the operational efficiency of fiscal systems and capture $1 trillion of the existing $5 trillion tax gap.
