in tax enforcement. For example, despite how widespread the value-added tax is, many low- and middle-income countries do not automatically or consistently crosscheck invoices and receipts reported by buyers and sellers for the same transactions, which can have sizeable discrepancies. In Uganda, for example, sellers and buyers were found to report different amounts in 79 percent of trading pair-month observations (Almunia at al., 2022). An example of the value of putting third party information to use comes from Pakistan. After many years of collecting third party information on firms paying value-added tax but the information to limited use, Pakistan tax authority achieved a 50 percent reduction in value added tax credits from adopting an automated risk analysis system that rejected suspicious claims in real time (Shah 2023).

Second, it is important to obtain information on a given tax base from multiple sources. A consistent pattern arises in which the tax authority attempts to increase enforcement using thirdparty information obtained on one margin, but taxpayers then adjust on another margin to undo impacts on their overall liability. For example, when tax authorities are given third-party information on revenues, taxpayers may adjust on their expenses or input deductions: Ecuadoran firms notified that they owed more in taxes responded by reporting higher costs (Carrillo, Pomeranz, and Singhal, 2017). Ethiopian firms responded the same way when newly mandated electronic fiscal devices <mark>increased firms reported revenues</mark> (Mascagni, Mengistu and Woldeyes, 2021 <mark>), as did Brazilian firms during an anti-tax evasion program in São Paulo, cutting the initiative’s revenue gains in half (N</mark> aritomi, 2019). Obtaining information on each input to a tax determination will help forestall such adjustments.

Finally, even as countries close potential loopholes within their domestic tax systems, another potential source of revenue loss lies in international tax evasion and avoidance, such as individuals concealing their income or wealth offshore, outside the reach of tax authorities, or multinationals legally shifting their profits to tax havens. These tax losses can be substantial. For example, an amnesty program on wealth taxation in Argentina revealed hidden assets equivalent to 21 percent of GDP (Londoño-Vélez and Tortarolo 2022). Profit-shifting can be a major source of revenue loss in lower-income countries. Data from the missingprofits.world website (based on Wier and Zucman 2022) suggest that 26 percent of corporate taxes in Nigeria are lost due to profit shifting, 13 percent from South Africa, and 6 percent from India.

Advances in computer-based data sharing across countries, such as Tax Information Exchange Agreement and Automatic Exchange of Information – Common Reporting Standards provide tools to uncover these attempts at avoidance and evasion as countries can obtain information on the overseas accounts of their citizens. Similarly, in regulating profit shifting, having access to data from other jurisdictions enables tax authorities to compare the price at which a firm wants to transfer an asset among its subsidiaries to a set of comparable transactions to determine whether it complies with arms-length principles--that is, such transactions should happen under the same conditions (including price) as it would between two separate firms. Low- and middle-income countries face challenges gaining access to these data as signing up to these exchanges requires countries to collect the same information in their own countries, for which they may lack capacity. Even after granted access, low- and middle-income countries then are confronted with the crucial step of using these third-party data effectively, through data analytics that match them to tax records and other in-country data sources to detect evasion and avoidance.

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