EU Member States lost an estimated €93 billion in Value-Added Tax (VAT) revenues in 2020, according to the 2022 Report on the VAT Gap released by the European Commission. Though still extremely high, the ‘VAT Gap’ – the estimated difference between expected revenues in EU Member States and the revenues actually collected – dropped by approximately €31 billion compared to the 2019 figures. This increase in VAT compliance can be explained to some extent by the effect of government support measures introduced in response to the COVID-19 pandemic, which were contingent on paying taxes. However, the VAT Gap clearly remains an important problem, at a time when governments need sustainable revenues to help weather today’s economic uncertainty.
