Source Report in English
- Significant Progress in VAT Compliance: EU Member States improved their Value Added Tax (VAT) collection between 2018 and 2022, but still faced a projected loss of approximately €89 billion in VAT revenues in 2022, down from €121 billion in 2018.
- Causes of Revenue Loss: The lost VAT revenues were primarily attributed to fraud, tax evasion and avoidance, non-fraudulent bankruptcies, calculation errors, and other factors, which negatively impact the funding of essential public services.
- Impact of Targeted Policy Measures: The report highlights that targeted measures, especially in digitizing tax systems and implementing real-time transaction reporting and electronic invoicing, have significantly contributed to reducing the VAT compliance gap.
- Future Reforms Needed: Ongoing reforms are crucial to further reduce the VAT gap, enhance revenue collection, and prevent fraud, as emphasized by Wopke Hoekstra, the Commissioner for Climate and Clean Growth.
- New Digital VAT Proposal: The Council approved a proposal in November 2024 for a digital VAT system aimed at ensuring real-time transaction reporting to tax authorities, which will help detect VAT fraud effectively and address issues related to intra-community fraud involving missing traders.
Press release of the European Commission:
Member States made significant progress in VAT compliance in 2022, but continuous efforts are still needed, according to the latest VAT GAP report.
Most EU Member States made significant progress in collecting Value Added Tax (VAT) between 2018 and 2022, according to a new report published today by the European Commission. The annual report on the VAT gap in the EU, which measures the difference between theoretically expected VAT revenues and the amount actually collected, shows that Member States will lose approximately €89 billion in VAT in 2022, down from €121 billion in 2018. This figure represents lost revenues primarily due to fraud, tax evasion and avoidance, non-fraudulent bankruptcies, calculation errors, and other factors. The progress made in reducing the VAT compliance gap is welcome, as losses in VAT revenue can negatively impact governments’ ability to finance essential public goods and services such as schools, hospitals, and infrastructure. The latest report highlights that targeted policy measures have made a significant difference, particularly those related to the digitization of tax systems, real-time transaction reporting, and electronic invoicing. Additionally, the report emphasizes that ongoing reforms are essential for continuing to reduce the VAT gap, ensuring more effective collection, and preventing fraud.
Wopke Hoekstra, Commissioner for Climate, Net Zero Growth, and Clean Growth, stated: “In 2022, the VAT deficit amounted to nearly €90 billion for the 27 Member States. This is a significant sum that could have been allocated to financing essential public goods and services such as schools, hospitals, and infrastructure. It is a missed opportunity with a high price.” In November 2024, the Council approved the proposal for VAT in the digital age, which represents a significant step toward a cross-border digital reporting system based on electronic invoicing. This proposal aims to ensure that tax authorities in Member States are informed of transactions in real-time, enabling them to detect VAT fraud and respond quickly. In this edition, the European Commission also provides a specific analysis of intra-community fraud involving missing traders (MTIC), a significant form of VAT non-compliance that exploits VAT-exempt exchanges of goods and services between EU Member States. In nominal terms, based on the range of products covered by the analysis, EU Member States lost between €13 billion and €33 billion annually between 2010 and 2023. The report also emphasizes the gaps to be addressed regarding VAT, namely uncollected VAT revenues due to reduced rates and exemptions that could be eliminated by EU Member States. More information is available in the press release, the full VAT gap report in the EU, and on the dedicated webpage of DG TAXUD.
See also
- EU VAT Gap down with 38Bn EUR to 61Bn EUR in 2021
- VAT Gap: EU countries lost €93 billion in VAT revenues in 2020
- VAT Gap: While gap continues to decrease, EU countries lost €134 billion in VAT revenues in 2019
- VAT Gap – €140 billion in 2018, with a potential increase in 2020 due to coronavirus
- EU VAT Gap report – EU countries lost 137.5BN on VAT in 2017
