EU countries lost an estimated total of €152 billion in Value-Added Tax (VAT) revenues in 2015, according to a new study by the European Commission.
The largest VAT Gaps were reported in Romania (37.2%), Slovakia (29.4%) and Greece (28.3 %). The smallest gaps were observed in Spain (3.5%) and Croatia (3.9 %). In absolute terms, the highest VAT Gap of €35 billion was in Italy. The VAT Gap decreased in most Member States, with the strongest improvements in Malta, Romania and Spain. Seven Member States saw small increases: Belgium, Denmark, Ireland, Greece, Luxembourg, Finland and the UK.
This October, the European Commission will set out proposals for the most far-reaching update to the EU's VAT rules in 25 years. VAT fraud should become easier to tackle and VAT collection made more efficient. Recent media reports have also linked large-scale VAT fraud with organised crime including terrorism. Solutions to this problem can only be found by Member States working together.
While Member States have already made efforts to reduce the VAT Gap, modernising the VAT system and adapting it to the challenges posed by massive fraud is the best way to secure the future of the single market. The reform of the current VAT system should also help the development of the digital single market and complement the agenda set by the Commission to achieve a fairer and more efficient tax system in the EU.