Each tax season ends with billions of tax dollars due, but unpaid. It’s the tax gap, the IRS nightmare, and it totals an average of 14% of payable taxes. While this may seem a lot, other countries get that even worse at tax compliance: Austria 74.80%, France 75.38%, Germany 67.72%, Netherlands 72.84%, Portugal 68.09%, United Kingdom 77.97%.
There is a close relation between tax rates and tax compliance. The higher the rate, the more likely are taxpayers to want to evade tax. Normally, a system that is accepted as fair, receives better compliance, but never 100%.
As Obama moves towards increasing taxes for higher earners, non-compliance numbers are expected to soar. While this may seem socially fair, the plummeting compliance rates with high earners may still have mid to low earners pay the bill.