VAT: EU Member States still losing almost €150bn in revenues according to new figures
EU countries lost almost €150 billion in Value-Added Tax (VAT) revenues in 2016, according to a new study published recently (by the European Commission.
The so-called 'VAT Gap' shows the difference between the expected VAT revenue and the amount actually collected. While Member States' have carried out a lot of work to improve VAT collection, the recent figures show that reform of the current EU VAT system combined with better cooperation at EU level are needed so that Member States can make full use of VAT revenues in their budgets.
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs said: "Member States have been improving VAT collection throughout the EU. This must be recognised and commended. But a loss of €150 billion per year for national budgets remains unacceptable, especially when €50 billion of this is lining the pockets of criminals, fraudsters and probably even terrorists. A substantial improvement will only come with the adoption of the VAT reform we proposed a year ago. I urge Member States to move forward on the definitive VAT system before the European Parliament elections in 2019."
In nominal terms, the VAT Gap decreased by €10.5 billion to €147.1 billion in 2016, a drop to 12.3% of total VAT revenues compared to 13.2% the year before. The individual performance of the Member States still varies significantly. The VAT Gap decreased in 22 Member States with Bulgaria, Latvia, Cyprus, and the Netherlands displaying strong performances, with a decrease in each case of more than 5 percentage points in VAT losses. However, the VAT Gap did increase in six Member States: Romania, Finland, the UK, Ireland, Estonia, and France.
While much progress has been achieved to improve VAT collection and administration at the EU level, Member States should now move forward and agree as soon as possible on the much broader reform to cut down on VAT fraud in the EU's system, as proposed last year by the Commission. The reboot would improve and modernise the system for governments and businesses alike, making the system more robust and simpler to use for companies.
The VAT Gap study is funded by the EU budget and its findings are relevant for both the Union and Member States as VAT makes an important contribution to the Union and national budgets. The study applies a “top-down” methodology using national accounts data to produce estimations of the VAT gaps.
For the first time, the 2018 report includes a broader analysis of the effect of some external factors such as the productive structure of the economy and unemployment, as well as those under the direct control of the tax administration such as the size of the tax administration and IT expenditures. This aspect is particularly important since investment in IT usually leads to a VAT gap reduction, as set out in recommendations previously made by the Commission to the Member States.
For more information, see our FAQ.
The full report and a factsheet is available here .
Latest News from
EIOPA calls upon national supervisory authorities to minimise the detriment if No Deal Brexit20/02/2019 12:25:00
EIOPA calls upon national supervisory authorities to minimise the detriment to insurance policyholders and benificiaries in case of a no withdrawal agreement between the United Kingdom and the European Union.
Immigration liaison officers: Council Presidency and European Parliament reach provisional agreement19/02/2019 16:25:00
The EU is strengthening the cooperation & coordination between liaison officers deployed to third countries by member states or the EU to deal with immigration-related issues.
EESC goes to Belfast to listen to concerns over #Brexit19/02/2019 14:10:00
The EESC, the EU house of organised civil society, represented by its Diversity Europe Group, met at Queen's University in Belfast on 15 February 2019 to take stock of the Brexit process and focus on its consequences for the Northern Ireland peace process.
European Coordinated Plan on Artificial Intelligence19/02/2019 12:25:00
The Council has adopted conclusions on the Coordinated Plan on the development and use of Artificial Intelligence Made in Europe.
EC welcomes first-ever EU standards to reduce pollution from trucks19/02/2019 11:37:00
The European Parliament and the Council have reached provisional agreement on a Regulation setting, for the first time in the EU, strict CO2 emission standards for trucks.
EU and global securities regulators welcome agreement on data transfer19/02/2019 09:25:00
The International Organization of Securities Commissions (IOSCO) and the European Securities and Markets Authority (ESMA) welcome the Opinion of the European Data Protection Board (EDPB) on their administrative arrangement for the transfer of personal data between European Economic Area (EEA) Financial Supervisory Authorities and non-EEA Financial Supervisory Authorities.
ESMA to recognise three UK CCPs in the event of a no-deal Brexit18/02/2019 16:25:00
The European Securities and Markets Authority (ESMA) has announced that in the event of a no-deal Brexit, three central counterparties (CCPs) established in the United Kingdom (UK) – LCH Limited, ICE Clear Europe Limited and LME Clear Limited – will be recognised to provide their services in the European Union (EU).
Ensuring basic air connectivity in the event of no-deal Brexit – Council sets its position18/02/2019 14:10:00
The EU is taking measures to mitigate the severe disruption to air connectivity for passengers and freight between the EU and the UK in the event of the UK leaving the EU without a deal.
New EU rules cut red tape for citizens living or working in another Member State as of tomorrow18/02/2019 13:43:00
New EU rules to cut costs & formalities for citizens living outside their home country now apply across the European Union.
EU steps up efforts to keep unsafe products off the internal market18/02/2019 11:25:00
The EU is introducing new rules which will ensure that products placed on the single market are safe & compliant with EU legislation protecting public interests, such as health & safety in general, health & safety at the workplace, consumers, the environment and public security.