Progress in VAT Compliance: Reduction in EU VAT Gap in 2021, but Significant Losses Remain

• The European Commission has published the annual VAT Gap study for 2021.
• Member States lost around €61 billion in VAT in 2021, compared to €99 billion in 2020.
• The losses are mainly due to VAT fraud, evasion, avoidance, bankruptcies, miscalculations, and financial insolvencies.
• The decrease in the VAT Gap is a positive development, as lost VAT revenues can impact government funding for public goods and services.
• Italy and Poland have recorded notable reductions in their national VAT Gap figures.
• Targeted policy responses, digitalization of tax systems, real-time reporting, and e-invoicing have contributed to the improvement.
• The COVID-19 pandemic and government support measures may have also played a role in driving positive change.
• Electronic payments and online shopping have increased VAT compliance.
• Member States have implemented effective measures against criminal VAT fraud.
• The Commission has proposed a cross-border digital reporting system based on e-invoicing to address VAT fraud.
• The 2023 VAT Gap report is available for download.

Source: taxation-customs.ec.europa.eu

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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