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 Milestones

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

4 innovative renewable energy projects powering Europe’s green future

Financing economic recovery, written by United Nations Under-Secretary-General

Is your smart home as safe as you think?

45th Anniversary of the French Confederation (Confédération Nationale des Junior Entreprises)

A Europe that delivers: EU citizens expect more EU level action in future

Islamophobia is driving more US Muslims to become politically engaged, suggests report

MEPs condemn attacks on civilians, including children, in Yemen

The banks first to benefit from the new euro trillion ECB plans to print

8 fascinating and fearsome frontiers of science you should know about

Making the move to more sustainable mobility – three steps for companies

Colombia: Rights experts condemn killing of reintegrated former rebel fighter, call for respect of peace process

EU-Russia summit in the shadows of Kiev’s fumes

The Parliament sets the way for the European Banking Union

6.1 billion EUR for sustainable fisheries and safeguarding fishing communities

Thursday’s Daily Brief: Safeguarding civilians, strengthening Ebola response in DR Congo, marking Fistula Day, updates on CAR and Syria

This is how India can become the next Silicon Valley

Turkey: Commission continues humanitarian support for refugees

19th EU-China Summit: A historical advance in the Chino-European rapprochement

The woman who wanted to be treated the same as the man

These countries are the most peaceful – in 3 charts

Alternative proteins will transform food, mitigate climate change and drive profits. Here’s how

Estonia: use robust growth to improve income equality and well-being

The use of mobile technologies in Radiation Oncology: helping medical care

These countries are leading the way in green finance

Shenzhen just made all its buses electric, and taxis are next

4 eco-friendly products put sustainable spins on classic practices, from teacups to hankies

Why the future is bright for drone technology

‘Jerusalem is not for sale’ Palestinian President Abbas tells world leaders at UN Assembly

US-China trade war: Washington now wants control of the renminbi-yuan

Look Mom, even the House of Lords says the #righttobeforgotten is not right

Portuguese Presidency outlines priorities to EP committees

An economist explains how to value the internet

Investing in rural women and girls, ‘essential’ for everyone’s future: UN chief

Cum-ex tax fraud scandal: MEPs call for inquiry, justice, and stronger tax authorities

Libyan authorities must shoulder the burden to support country’s ‘vulnerable’ south

COVID 19 Vaccine: A new terror or a savior for mankind?

State aid: Commission approves €150 million Austrian subordinated loan to compensate Austrian Airlines for damages suffered due to coronavirus outbreak

The status of the Code of Medical Ethics: loading

UN Security Council offers Yemen Special Envoy ‘their full support’

Over 1 million health consultations provided in Yemen in 2019: UN migration agency

Why the ECB prepares to flood the markets with more and free of charge euro; everybody needs that now

“I believe that startups are for grown-up men, those, who have already achieved something “

Do not jeopardise future-oriented EU programmes, say EP’s budget negotiators

‘Global sisterhood’ tells perpetrators ‘time is up’ for pandemic of violence

One Hundred Years of Qipao History: from Shanghai to EU

Finland is a world leader in clean energy. Here’s what’s driving its success

Nearly four million North Koreans in urgent need, as food production slumps by almost 10 per cent

Will the Greek economy ever come back to growth?

3 important lessons from 20 years of working with social entrepreneurs

At this ‘critical moment’, UN chief urges anti-corruption conference to adopt united front

We are stronger than this pandemic (COVID-19)

EU lawmakers vote to reintroduce visas for Americans over “reciprocity principle”

‘Endemic’ sexual violence surging in South Sudan: UN human rights office

Public Policies for LGBT in Brazil

A faster, fairer way to retire carbon-emitting assets

Amid pandemic detours, mental health matters

Coronavirus: Commission concludes talks to secure future coronavirus vaccine for Europeans

Why hourly workers should have the same benefits as salaried ones

How do we design an inclusive energy transition?

State aid: Commission approves €300 million Austrian scheme to support organisers of events affected by coronavirus outbreak

More Stings?

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