Estimation methods for the personal oncome tax gap (including social security contributions) in the EU : Part 2: An approach based on survey data

This report presents the findings from an experimental estimation of the personal income tax (PIT) and social security contributions (SSC) compliance gaps for Austria (years 2009, 2014, 2019) and Poland (years 2016-2021). The methodology used was developed during Phase I of this study, which concluded that, out of the approaches based on the data available to the study team, a methodological approach based on survey data from National Statistical Institutes would be superior. The objective of this report is to verify if the selected methodological approach could be successfully implemented across Member States. Contained in the report are the results of this experimental implementation, along with a detailed description of the estimation algorithm, problems encountered and the impact of the various choices made on the estimates. The methodology applied in this study combined direct and indirect estimation approaches, assuming that the theoretical PIT and SSC liability could be calculated on the basis of income declared in survey responses, with added controls to prevent imprecisions in the results. The overall algorithm includes post-stratification and imputation of missing revenue in surveys, use of Engel curve approaches to estimate the degree of underreporting, correction of reported income, modelling tax rules, the actual calculation, a selection of the baseline results and extraand intrapolation of estimates for years not covered by the core dataset.