EU

#VATGap - EU countries lost €137 billion in VAT revenues in 2017

Published

7 years ago

September 5, 2019

EU countries lost €137 billion in Value-Added Tax (VAT) revenues in 2017, according to a study released by the European Commission today. The VAT Gap describes the overall difference between the expected VAT revenue and the amount actually collected. It has reduced somewhat compared to previous years but remains very high, highlighting once more the need for comprehensive reform of the EU VAT rules, as proposed in 2017 by the Commission.

New rules would help clamp down on VAT fraud and improve the rules for legitimate businesses and traders. Economic and Financial Affairs, Taxation and Customs Commissioner Pierre Moscovici said: "The favourable economic climate and some short-term policy solutions put in place by the EU helped to lower the VAT Gap in 2017. However, to achieve more meaningful progress we will need to see a thorough reform of the VAT system to make it more fraud-proof. Our proposals to introduce a definitive and business-friendly VAT system remain on the table. Member states cannot afford to stand by while billions are lost to illegal VAT carousel fraud and inconsistencies in the system.”

Romania recorded the largest national VAT Gap with 36% of VAT revenues going missing in 2017. This was followed by Greece (34%) and Lithuania (25%). The smallest gaps were in Sweden, Luxembourg and Cyprus where only 1% of VAT revenues on average fell by the wayside. In absolute terms, the highest VAT Gap of around €33.5bn was in Italy. The VAT Gap measures the effectiveness of VAT enforcement and compliance measures in each member state, as it provides an estimate of revenue loss due to fraud and evasion, tax avoidance, bankruptcies, financial insolvencies as well as miscalculations.

You can find a press release, FAQ and factsheet online. The report itself is available here.

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