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An estimated
€177 billion in VAT revenues was lost due to non-compliance or
non-collection in 2012, according to the latest VAT Gap study published
by the Commission today. This equates to 16% of total expected VAT
revenue of 26 Member States.
The VAT Gap study sets out detailed data on the difference between the
amount of VAT due and the amount actually collected in 26 Member States
in 2012. It also includes updated figures for the period 2009-11, to
reflect a refinement of the methodology used. The main trends in the VAT
Gap are also presented, along with an analysis of the impact that the
economic climate and policy decisions had on VAT revenues.
Algirdas Šemeta, Commissioner for Taxation, said: "The
VAT Gap is essentially a marker of how effective – or not - VAT
enforcement and compliance measures are across the EU. Today's figures
show there is a lot more work to be done. Member States cannot afford
revenue losses of this scale. They must up their game and take decisive
steps to recapture this public money. The Commission, for its part,
remains focussed on a fundamental reform of the VAT system, to make it
more robust, more effective and less prone to fraud."
The VAT Gap is the difference between
the expected VAT revenue and VAT actually collected by national
authorities. While non-compliance is certainly an important contributor
to this revenue shortfall, the VAT Gap is not only due to fraud. Unpaid
VAT also results from bankruptcies and insolvencies, statistical errors,
delayed payments and legal avoidance, amongst other things.
In 2012, the
lowest VAT Gaps were recorded in the Netherlands (5% of expected
revenues), Finland (5%) and Luxembourg (6%). The largest Gaps were in
Romania (44% of expected VAT revenues), Slovakia (39%) and Lithuania
(36%). Eleven Member States decreased their VAT Gap between 2011 and
2012, while 15 saw theirs increase. Greece showed the greatest
improvement between 2011 (€9.1 billion) and 2012 (€6.6 billion), although it is still one of the Member States with a high VAT Gap (33%).
Background...
The VAT Gap
study is funded by the Commission as part of its work to reform the VAT
system in Europe and clamp down on tax fraud and evasion. Tackling the
VAT Gap requires a multi-pronged approach.
First, a
tougher stance against evasion, and stronger enforcement at national
level, are essential. The VAT reform launched in December 2011 has
already delivered important tools to ensure better protection against
VAT fraud (see IP/11/1508). For example, the Quick
Reaction Mechanism, adopted in June 2013, allows Member States to react
much more swiftly and effectively to sudden, large-scale cases of VAT
fraud (see IP/12/868).
Secondly,
the simpler the system, the easier it is for taxpayers to comply with
the rules. Therefore, the Commission has focussed intently on making the
VAT system easier for businesses across Europe. For example, new
measures to facilitate electronic invoicing and special provisions for
small businesses came into force in 2013 (see IP/12/1377), and the proposed standard VAT declaration (see IP/13/988)
will significantly reduce the administrative burden for cross-border
businesses. From 1 January 2015, a One Stop Shop will enter into force
for e-services and telecoms businesses. This will promote more
compliance by greatly simplifying VAT procedures for these businesses
and enabling them to file a single VAT return for all their activities
across the EU (see IP/12/17).
Thirdly,
Member States need to modernise their VAT administrations in order to
reduce the Vat Gap. For example, potential measures to improve
procedures are addressed in the report on VAT collection and control
procedures across Member States, within the context of EU own resources,
published in February 2014 (see EXME 14/12.02).
Finally, Member States need to reform
their national tax systems in a way that facilitates compliance, deters
evasion and avoidance, and improves the efficiency of tax collection.
The Commission has given clear guidance in this respect through the
country specific recommendations.
