54. Searching for gaps: Bottom-up approach for Slovakia

More than half of the corporate income tax (CIT) revenues is associated with the largest multinational corporations, although they represent only 1 % of the corporate universe in Slovakia. The rest of CIT revenues consists of small and medium enterprises (SMEs). Facing only a tiny risk of tax audit, some firms routinely „adjust“ their actual tax base. We conjecture that such noncompliance, while individually negligible, casts a severe threat upon the scale and the dynamics of the Slovak CIT gap. We take the first step towards disentangling and monitoring this threat by building parametric and semi-parametric selection-bias-corrected regression models from firm-level data and capturing the main descriptive attributes of the gap. Our regional, sectoral, and country-wide estimates are based on individual characteristics of firms. Apart from the gap estimates, we provide a robust assessment of the quality of tax audit data, urging the Slovak tax authority to improve audits' utility.

 Analýza bola schválená Odborno-metodickou komisiou ako recenzovaná na základe posudkov: