03 December 2021

EU VAT GAP REPORT

On 2 December, the European Commission published its annual VAT Gap Report, which measures the overall difference between the expected VAT revenue and the amount actually collected in EU Member States. This year’s study shows that Member States lost an estimated €134 billion in VAT in 2019. This figure represents revenues lost to VAT fraud and evasion, VAT avoidance and optimisation practices, bankruptcies and financial insolvencies, as well as miscalculations and administrative errors.

The report shows that, in nominal terms, the overall EU VAT Gap decreased by almost €6.6 billion to €134 billion in 2019, a marked improvement on the previous year’s decrease of €4.6 billion. Even though the overall VAT Gap has been improving between 2015 and 2019, the full extent of the COVID-19 pandemic on consumer demand and therefore VAT revenues in 2020 remains unknown.

In 2019, Romania recorded the highest national VAT compliance gap with 34.9% of VAT revenues going missing in 2019, followed by Greece (25.8%) and Malta (23.5%). The smallest gaps were observed in Croatia (1.0%), Sweden (1.4%), and Cyprus (2.7%). In absolute terms, the highest VAT compliance gaps were recorded in Italy (€30.1 billion) and Germany (€23.4 billion).

Source: European Commission