The trillion-dollar prize: Plugging government revenue leaks with advanced analytics
- Susan Cunningham, Jonathan Davis, and Thomas Dohrmann
- Jan 2018
- McKinsey & Co
- International
Rare is the government today whose fiscal challenges don’t handcuff leaders seeking to provide for the future through investments in infrastructure, education, and healthcare. Often the difference between funded and deferred policy priorities comes down to the perennial and seemingly intractable challenge of revenue lost to tax noncompliance and improper government payments. Our analysis suggests that close to 20 percent of government revenues worldwide, or about $5 trillion, go missing each year, either in dollars owed but never paid or in outbound payments gone awry. In this era of growing demands for government services and pressing budget challenges worldwide, few fiscal opportunities loom larger than reducing these leakages (Exhibit 1).
Overall, this research suggests that in larger, developed economies, these capabilities have the potential to increase total government revenues by 1 to 3 percent. In less-formal, developing economies, the opportunity is much larger, as much as 10 percent or more. To put this number in context, worldwide government deficits are expected to be 2.6 percent of estimated GDP in 2021.1 Improving revenue collections just 1 percent of GDP would eliminate over one-third of the deficit, equipping leaders to make and implement better policy choices...
