Asymmetric information

Bill Dodwell considers how third-party data can be utilised to increase compliance and reduce the tax gap

One of the key topics for tax administrations concerns what academics might call asymmetric information. What this means is that taxpayers should know what their taxable income and gains are – but that tax authorities don't have this data. They need to get it from taxpayers or from others. The key bridge for tax authorities is through accessing third-party data. The most obvious source of UK third-party data is of course PAYE data, supplied every month by over 2 million employers.