This paper is an attempt to analyze the tax leakage. Tax leakage by causing a revenue drain may adversely affect the primary account position and thus may indirectly influence the fiscal sustainability of the state's economy. This is the main thread of argument coming out of the paper. Our major finding is that almost thirty five percent of the total tax potential is not tapped. Further, this amount of tax leakage is large enough to eliminate the primary account surplus from the economy. In fact, keeping a primary account surplus is a preliminary condition for attaining fiscal sustainability in the economy. Thus, it is clear that the presence of tax leakage in the economy is destroying even the primary condition for achieving fiscal sustainability. However, tax leakage is a factor upon which the government has a control or in other words, the presence of tax leakage may be considered as a mirror image of the inefficiency of tax administration in the economy.
Economy, Tax Leakage, Tax, and Fiscal Sustainability
