VAT Gap: EU countries lost €137 billion in VAT revenues in 2017

eurocent

(Jonathan Brinkhorst, Unsplash)

This article is brought to you in association with the European Commission.


EU countries lost €137 billion in Value-Added Tax (VAT) revenues in 2017 according to a study released by the European Commission today. The so-called ‘VAT Gap’ – or the overall difference between the expected VAT revenue and the amount actually collected – has reduced somewhat compared to previous years but remains very high. This substantial VAT Gap again highlights the need for comprehensive reform of the EU VAT rules, as proposed in 2017 by the Commission, and increased cooperation between Member States to clamp down on VAT fraud and to make the rules work for legitimate businesses and traders. 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.

Commissioner for Economic and Financial Affairs, Taxation and Customs, 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 €33.5 billion was in Italy.

Individual performances across Member States still vary significantly. The VAT Gap decreased in 25 Member States and increased in three. Malta (-7 percentage points), Poland (-6 percentage points) and Cyprus (-4 percentage points) showed strong performances, with large decrease in their VAT losses. Seven Member States, namely Slovenia, Italy, Luxembourg, Slovakia, Portugal, Czechia and France also revealed robust results, reducing their VAT Gap by more than 2 percentage points. The VAT Gap grew noticeably in Greece (2.6%) and Latvia (1.9%) and marginally in Germany (0.2%).

In nominal terms, the VAT Gap decreased by €8 billion to €137.5 billion in 2017, a similar amount as the 2016 decrease of €7.8 billion. The VAT Gap in 2017 represents 11.2% of total VAT revenues in the EU, compared to 12.2% the year before. This downward trend can now be observed for the fifth consecutive year.

The VAT Gap report published today concentrates on 2017, as this is the most recent period for which comprehensive national accounts data and own resources data are available. This year’s study introduces a new element, however: a forecasting exercise which provides so-called “fast estimates” for the year preceding the publication year, i.e. 2018. These fast estimates indicate that the VAT Gap will likely continue its downward trend and fall below €130 billion and 10% of the VAT Total Tax Liability (VTTL) in 2018.

Background

The VAT Gap study is funded by the EU budget and its findings are relevant for both the EU and Member States as VAT makes an important contribution to both the EU and national budgets. The study applies a “top-down” methodology using national accounts data to produce estimations of the VAT Gaps. The method used was improved and refined over the years and offers now the best combination of estimates in terms of comparability of results and accuracy.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

‘Stealing’ food from hungry Yemenis ‘must stop immediately’, says UN agency

US migrant children policy reversal, still ‘fails’ thousands of detained youngsters: UN rights experts

The 5 mistakes we’re making in the fight against global energy poverty

EU Commission expects consumer spending to unlock growth

EU-UK Statement following the High Level Meeting on 15 June

5 futuristic ways to fight cyber attacks

Remarks by Commissioner Lenarčič on the deployment of EU Medical Teams to Italy

How the digital finance revolution can drive sustainable development

IMF: When high yield goes boom

UN relief official in Yemen condemns ‘horrific’ attack on passenger buses

National parks transformed conservation. Now we need to do the same for the ocean

UN member states express their will to tackle global migration but specific actions are still missing

New UN-supported farming app is cream of crop in tackling Sahel pest

COVID-19: EU co-finances the delivery of more protective equipment to China

Parliament backs a modernised EU electoral law

Is your business model fit for the Fourth Industrial Revolution?

More efforts needed to boost trust in business and finance

3 reasons why Singapore is the smartest city in the world

Although Greece is struggling to pay salaries and pensions Varoufakis is “optimistic”; the Sting reports live from EBS 2015

A shipping industry leader explains how to keep supply chains moving amid a pandemic

EU and China in search of a win-win agreement through strategic cooperation ahead of the EU-China summit

Burning Amazon rainforests: Darting towards the doom of Human Race

FROM THE FIELD: ‘Hope’ on the horizon as UN Peacekeepers push deep into Mali

“Is Europe innovative? Oh, Yes we are very innovative!”, Director General of the European Commission Mr Robert-Jan Smits on another Sting Exclusive

Spread of polio still an international public health concern

New citizenship law in India ‘fundamentally discriminatory’: UN human rights office

EU unveils plan to accelerate Capital Markets Union ahead of London’s departure from the bloc

Mali just took a huge step towards universal healthcare

Women outliving men ‘everywhere’, new UN health agency statistics report shows

First-ever World Braille Day underscores importance of written language for human rights

The West and Russia impose a new order on the world

Praising Roma’s contributions in Europe, UN expert urges end to rising intolerance and hate speech

Security Council welcomes Yemen breakthrough, but lasting peace remains a ‘daunting task’

This woman changed the world of work – and you’ve probably never heard of her

Can Obama attract Iran close to the US sphere of influence?

UN launches plan to promote peace, inclusive growth in Africa’s Sahel

European Commission presents comprehensive approach for the modernisation of the World Trade Organisation

SMEs are driving job growth, but need higher investment in skills, innovation and tech to boost wages and productivity

Structuring Your Perception: The Key to a Good Mental Health during COVID-19

Does the world have strong enough institutions to handle risks like Trump and Brexit?

5 facts to know about Africa’s powerhouse – Nigeria

Prevention is key to ‘breaking the cycle of HIV transmission’, UN chief tells General Assembly

Trump’s Pandemic Failure: A Missed Opportunity

Greece: Tsipras’ referendum victory does not solve the financial stalemate of the country and its banks

5 lessons from China on how to drive sustainable growth

Public climate finance to developing countries is rising

Canada has the most comprehensive and elaborate migration system, but some challenges remain

How much time has the ‘European Union of last chance’ left?

Long-term EU budget: Parliament wants safety net for beneficiaries

Yemen: Security Council backs new mission in support of key port city truce

The result of European Elections 2019 seals the end of the business as usual era in Brussels

Syrian civilians must be protected amid ISIL executions and airstrikes: Bachelet

UN Committee says Ebola in DR Congo still an international public health emergency

OECD will follow Canadian proceedings addressing allegations of political interference in foreign bribery prosecution

Hunger in Yemen: WFP considers aid suspension in face of repeated interference by some Houthi leaders

Ten UN peacekeepers killed in a terrorist attack in northern Mali

New General Assembly President brings ‘valuable insights’ into key UN challenges

The G7 should take the lead on ocean targets for 2020

The DNA of the future retail CEO

‘Cataclysmic events’ in Hiroshima, Nagasaki, began ‘global push’ against nuclear weapons says Guterres, honouring victims

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s