Determine the income gap with respect to the income capacity of value added tax in Iran, during the five year period 2008 to 2015

VAT Act has been implemented since 22 Sep. 2008, after approval of VAT Act by the Islamic Consultative Assembly and then by the Council of Guardians. In accordance with Article 85 of the Constitution of the Islamic Republic of Iran, this Act was originally implemented for five year on trial basis and that was to be re-assessed and after removal of executive and procedural problems, approved as permanent Act by the Islamic Consultative Assembly. In this paper, we will determine the VAT revenue gap in Iran, taking into consideration the capacity of this tax for application on goods and services with standard ratesing the macroeconomic method first, the potential basis of this tax system, based on the percentage of gross domestic product during the years 2008-2015, and then the potential (expected) income tax at the general rate and based on the statistical data available in the national accounts of the Central Bank of the Islamic Republic of Iran. In the next step, considering the amount of revenue collected by the Tax Administration of the country during the studies years, the VAT GAP computed at (31.43%) and the tax efficiency of this tax system in Iran during the studied years equaled 69% Calculation that represents a good performance of implementing this tax system in Iran.