- The EU’s VAT compliance gap increased to €128 billion (9.5% of theoretical VAT) in 2023, reversing previous improvements and rising from 7.9% in 2022.
- The gap widened due to pandemic effects, inflation, supply disruptions, and geopolitical shocks, with VAT revenues growing slower than the theoretical tax base.
- Compliance performance varied widely: Austria, Finland, and Cyprus had the lowest gaps, while Romania and Malta had the highest; median Member State performance also worsened.
- The VAT policy gap remains high at 50.5%, mainly due to exemptions and reduced rates, with significant variation between countries.
- Economic disruptions and changing consumption patterns have weakened VAT collection efficiency, while policy responses included phasing out some crisis-related VAT reliefs.
Source: meridianglobalservices.com
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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