EU countries lost €140bn in VAT revenues in 2018

Though still extremely high, the overall VAT Gap has improved marginally in recent years

The EU Member States lost an estimated €140bn in Value-Added Tax (VAT) revenues in 2018, a new report released by the European Commission on Thursday shows. Though still extremely high, the overall VAT Gap, or the difference between expected revenues in EU countries and the revenues actually collected, has improved marginally in recent years. However, figures for 2020 forecast a reversal of this trend, with a potential loss of €164bn in 2020 due to the effects of the coronavirus pandemic on the economy.

In nominal terms, the overall EU VAT Gap slightly decreased by almost €1bn to €140.04bn in 2018, slowing down from a decrease of €2.9bn in 2017. This downward trend was expected to continue for another year, though the coronavirus pandemic is likely to revert the positive trend.

The considerable 2018 VAT Gap, coupled with forecasts for 2020, which will be impacted by the coronavirus pandemic, highlights once again the need for a comprehensive reform of EU VAT rules to put an end to VAT fraud, and for increased cooperation between Member States to promote VAT collection while protecting legitimate businesses, the report pointed out.

“The coronavirus pandemic has drastically altered the EU's economic outlook and is set to deal a serious blow to VAT revenues too. At this time more than ever, EU countries simply cannot afford such losses. That's why we need to do more to step up the fight against VAT fraud with renewed determination, while also simplifying procedures and improving cross-border cooperation,” Paolo Gentiloni, Commissioner for Economy, said.

As in 2017, Romania recorded the highest national VAT Gap with 33.8% of VAT revenues gone missing in 2018, followed by Greece (30.1%) and Lithuania (25.9%). In absolute terms, the highest VAT Gaps were recorded in Italy (€35.4bn), the UK (€23.5bn) and Germany (€22bn).

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