- VAT Gap Decline: The VAT Gap in Europe decreased from €99 billion in 2020 to €61 billion in 2021, driven by digitization, government support during COVID-19, and a shift towards cashless payments, benefiting countries like Italy and Poland.
- VAT Compliance and Policy Gaps: In 2021, the VAT Compliance Gap highlighted non-compliance issues, while the VAT Policy Gap reached €1,125 billion, largely due to price inflation, with an average policy gap of 19.2% across OECD countries in 2022.
- Trends in VAT Rates: The European Union’s Reduced VAT Rates Directive allows member states greater flexibility in applying reduced or zero rates on certain supplies, supporting climate goals and reducing VAT avoidance, exemplified by Ireland’s zero VAT on solar panels.
- Platform Economy Impact: The rise of the platform economy has increased VAT obligations for online marketplaces, making them responsible for collecting VAT on certain transactions, with the upcoming ViDA initiative set to extend these obligations by July 1, 2027.
- Future of VAT Reporting: The shift towards real-time reporting and automated VAT compliance is evident, with countries implementing pre-filled VAT returns based on e-invoicing data, necessitating businesses to adapt to new technologies and regulations for enhanced compliance and effective tax strategies.
Source Taxbackinternational
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