On 4 September 2015, the European Commission released the latest figures on the so-called “VAT Gap”. The VAT Gap is an indicator of the effectiveness of VAT enforcement and compliance measures, as it provides an estimate of revenue loss due to tax fraud, tax evasion and avoidance, bankruptcies, financial insolvencies as well as miscalculations. Based on the VAT collection figures from 2013, the total amount of VAT lost across the EU is estimated at EUR 168 billion. This represents a loss of 15.2% of the total expected VAT revenue. In 2012, the VAT Gap was estimated at EUR 177 billion, i.e. 16% of the total VAT revenue. This only leads to one conclusion: no significant improvement has been made in terms of VAT revenue collection.
In 2013, the VAT Gap in individual Member States ranged from the low 4% in Finland, the Netherlands and Sweden to the high percentages of 38 in Lithuania and 41 in Romania.
Overall, 15 Member States decreased their VAT Gap, with the largest improvements in Latvia (reduction of 4%), Malta (reduction of 5%) and Slovakia (reduction of 4%). Eleven Member States saw an increase in the VAT Gap, with the highest deteriorations in Estonia (increase of 4%), Italy (increase of 2%) and Poland (increase of 2%).
Belgium’s total VAT liability rose very slightly in 2013, reflecting the sluggish behaviour of the economy. VAT revenues in Belgium increased from EUR 26.896 million to EUR 27.226 million (which is a modest 1.2%). Overall, this increase led to a reduced estimated VAT Gap (from EUR 3.376 million in 2012 to EUR 3.186 million in 2013). In Belgium, 26% of tax revenues are VAT.[1]
The VAT Gap will remain very high on the agenda of the EU Commission. The Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici, declared the following:
“This important study highlights once again the need for further reform in VAT collection systems across the EU. I urge Member States to take the steps needed to fight tax evasion and tax fraud at all levels. This remains a burning issue and is at the top of this Commission’s agenda.”
The Commission has already identified key actions to assist Member States to clamp down on tax fraud and evasion.
Link to full press release:
http://europa.eu/rapid/press-release_IP-15-5592_en.htm
Link to full study:
http://ec.europa.eu/taxation_customs/resources/documents/common/publications/studies/vat-gap.pdf
For more information: Wouter Villette, Partner Indirect Tax, 02/710 73 02, wouter.villette@be.pwc.com
[1] Tax revenues collected at Belgian federal (i.e. national) level for the year 2013
