Romania has the largest so-called “VAT gap,” the difference between actual and expected VAT revenues, in the European Union. According to a 2019 European Commission study, 36% of Romania’s VAT revenues, EUR 6.41 billion, went missing in 2017. Romania’s VAT gap reached 48% in 2011, following a sharp increase in the standard VAT rate from 19% to 24% in 2010. This was not surprising, as studies indicate that compliance falls when VAT rates rise, especially in countries with weaker enforcement mechanisms. More troubling is that Romania’s VAT gap was higher in 2017 than in 2016, despite two reductions of the standard rate, from 24% to 20% in 2016 and from 20% to 19% in 2017.
Source SOVOS
