The main objective of this study is to estimate the reduction in government revenues due to tax evasion and interruptions in tax collection. In this regard, we use Tanzi model to estimate interruption in the tax collecting. Also, the latent variable approach is used to estimate tax evasion through underground economy. Due to the high inflation rate in the country, interruption in the collecting tax leads to decrease the real value of the tax revenue. However, according to Tanzi model, if the tax system becomes flexible, an increase in the inflation rate can increase the real value of the tax revenue. For this reason, the price elasticity of tax revenue is a measure of flexibility of the tax system. To check whether the inflation rate and the tax system’s interruption in Iran have reduced real collected incomes or not, we use two equations. One of them is for calculation of tax collection interruption, and the other is to estimate the price elasticity of tax revenue. The results show that volume of the tax evasion was increasing during the study period. Moreover, the tax system has low price elasticity, and the inflation induces interruption in tax collecting reduces the real value of tax revenues. The average of the interruption in tax collecting is 1.9 years. Furthermore, the share of the tax interruption in creating the tax gap is about 77% in 2002, which is the highest level in the period. In addition, the largest share of tax evasion was in 2011 that about 48%. Finally, it should be noted that the average share of tax collection interruptions during the study period is around 64%, which show that the interruptions are more effective factor than the tax evasion in the creation of the tax gap.