Assessment of Revenue Potential

The first step in revenue reform is often to identify revenue potential in the economy, as this influences revenue policy, law and administration reform.

In less developed countries, revenue potential assessments are usually conducted from the top-down. This is an easier, more general assessment, based on readily available macroeconomic data that can be used to provide an idea of the size and type of economy, what revenue should be expected, and from which sources.

A more complex method of revenue potential assessment is from the bottom-up and this is generally applied when there is an extant revenue system that has a problem of low compliance. In this method the focus is on, for example, analysing the quality and quantity of tax returns to understand how much higher revenue could and should be.