The Barcelona Institute of Economics (IEB) and the Andorran Ministry of Finance have signed an agreement to evaluate the tax gap in the Pyrenean country. Specifically, the agreement, in place for a period of three years, aims to evaluate the tax gap existing in several different taxes: general indirect tax, personal income tax and company tax.
The purpose of this type of study is to gain a better understanding of the behaviour of each category of tax. This will make it possible to estimate collection differences between the theoretical tax and what actually happens in practice, and also to identify tax erosion or fraud mechanisms.
Andorra’s tax model is based on competitive taxation with low nominal rates. In order to maintain these rates and ensure state revenues, tax needs to be efficient and taxpayers need to cooperate consistently. Andorra has developed several categories of taxes over the years and now it has decided to evaluate in greater detail the correct functioning of these different categories.